Preamble

The House met at a Quarter before Three of the Clock, Mr. Speaker in the Chair.

DEATH OF A MEMBER.

Mr. Speaker made the following communication to the House:

I regret to have to inform the House of the death of Sir Nairne Stewart Sandeman, Baronet, late Member for the County of Lancaster (Middleton and Prestwich Division), and desire to express our sense of the loss we have sustained and our sympathy with the relatives.

PRIVATE BUSINESS.

MINISTRY OF HEALTH PROVISIONAL ORDER (THIRSK DISTRICT WATER) BILL,

"to confirm a Provisional Order of the Minister of Health relating to the Thirsk District Water Company, Limited," presented by Mr. Elliot; read the First time; and referred to the Examiners of Petitions for Private Bills, and to be printed. [Bill No. 35.]

MINISTRY OF HEALTH PROVISIONAL ORDER (LITTLESTONE-ON-SEA AND DISTRICT WATER) BILL,

"to confirm a Provisional Order of the Minister of Health relating to the Littlestone-on-Sea and District Water Company," presented by Mr. Elliot; read the First time; and referred to the Examiners of Petitions for Private Bills, and to be printed. [Bill No. 36.]

Oral Answers to Questions — GUARANTEES AGAINST AGGRESSION.

Mr. Thorne: asked the Prime Minister what military alliances, involving mutual guarantees, Great Britain has with other countries; and what military alliances, involving similar guarantees, France, Russia, Germany and Italy have with other countries?

The Under-Secretary of State for Foreign Affairs (Mr. Butler): I would refer the hon. Member to the reply given, by the Prime Minister to the hon. Member for South Shields (Mr. Ede) on 17th January last. Since that date His Majesty's Government in the United Kingdom and the French Government issued a solemn declaration on 28th March, the text of which was communicated to the House on 2nd April.
I will, with permission, circulate the reply to the second part of the Question in the Official Report.

Mr. Thorne: Shall I find all the information in that reply?

Mr. Butler: Yes, Sir. I will send the hon. Member a copy.

Following is the reply:

France.

A list of certain treaties to which France is a party was contained in a reply given to the hon. Member for East Wolverhampton (Mr. Mander) on 30th November, 1938. France is also a party to the Treaty of Mutual Assistance between the United Kingdom, France and Turkey of 19th October, 1939, and to the solemn declaration issued by His Majesty's Government in the United Kingdom and the French Government on 28th March last.

Soviet Union.

In addition to the Franco-Soviet Treaty of Mutual Assistance referred to in the reply given to the hon. Member for East Wolverhampton mentioned above, the Soviet Union has mutual assistance treaties with Estonia, Latvia and Lithuania.

Germany and Italy.

Italy concluded a military alliance involving mutual guarantees with Germany on 22nd May, 1939.

Mr. Mander: asked the Prime Minister whether he will give an assurance that, in the event of further aggression against neutral European States, the overseas possessions of such States will not be permitted to be used as bases for enemy action?

The Prime Minister (Mr. Chamberlain): In the hypothetical circumstances to which the hon. Member refers, such action would be taken as the interests of Allied security required.

Mr. Mander: May I assume that it will be taken with the Government's usual resolute determination?

Oral Answers to Questions — GREAT BRITAIN AND RUSSIA.

Mr. David Adams: asked the Prime Minister whether any further steps have been taken with respect to a new trade agreement with the Union of Soviet Socialist Republics; and whether it is in tended that our Ambassador will shortly return to Moscow?

Mr. Butler: In response to the proposal for a resumption of Anglo-Soviet trade negotiations recently put forward by the Soviet Ambassador, His Majesty's Government have indicated that it is of paramount importance for them so to adapt their economic policy as best to further their war effort. Any trade agreement concluded with a neutral Government must therefore be related to present war conditions, and in particular to the supplies of essential commodities to the enemy. His Majesty's Government have accordingly invited the Soviet Government to put forward for their consideration concrete proposals for a trade agreement, having regard to these considerations. No date has yet been fixed for the return of His Majesty's Ambassador to Moscow.

Lieut.-Colonel Acland-Troyte: Does my right hon. Friend think that he can trust these people not to help the enemy whatever promises they make? Are they not quite untrustworthy?

Mr. Butler: We must await the reply of the Soviet Government.

Mr. Adams: Has the Minister any information as to when the Ambassador is to return?

Mr. Butler: The Ambassador at present is having leave in this country.

Oral Answers to Questions — GREENLAND.

Mr. Mander: asked the Prime Minister whether has has any statement to make with reference to the future of Greenland in connection with the recent pronouncement of the British Ambassador to the United States of America on the subject?

Mr. Butler: No, Sir. The position of Greenland as affected by the occupation

of Denmark is at present receiving consideration by His Majesty's Governments in the United Kingdom and in Canada.

Mr. Mander: Did not the Ambassador make some reference to the Monroe Doctrine, and would it be possible to know what that was?

Mr. Butler: The Ambassador referred to the Monroe Doctrine, and I am referring to the present position about Greenland.

Mr. Mander: The Question I asked the right hon. Gentleman was as to what the Ambassador said. That is what I want to know, and will he kindly answer that Question?

Mr. Butler: I gave the hon. Member the answer, which is that I stated that the position of Greenland is being considered by His Majesty's Government and the Canadian Government.

Oral Answers to Questions — ROYAL AIR FORCE.

COLOURED BRITISH SUBJECTS (ENLISTMENT).

Mr. Leach: asked the Secretary of State for Air whether he is aware that a colour bar exists in the Royal Air Force; whether it has his approval; and whether he will issue advice to coloured British subjects desirous of enlisting as to what they should do?

The Under-Secretary of State for Air (Captain Harold Balfour): There is no such bar. British subjects of non-European descent who are in this country are considered on their merits for service with the Royal Air Force, and several have been accepted for such service since the outbreak of war. Any others who desire to enlist should apply to the nearest combined recruiting centre.

Mr. Leach: While thanking the Minister for that very satisfactory reply, may I ask him whether he is aware that this obstacle of colour is actually placed in the way of coloured applicants in some places, and if I give him evidence of that, will he look into the matter?

Captain Balfour: If the hon. Gentleman will give me any specific evidence that any recruiting centre is imposing such a bar, or stating that there is any such imposition, I shall be very glad to receive that information.

Mr. McGovern: Is it known whether there is any colour bar to the hon. Member for Central Bradford (Mr. Leach) being bombed?

CAMOUFLAGE.

Mr. Mander: asked the Secretary of State for Air whether arrangements have now been made to alter the colouring of the machines of the Royal Air Force Coastal Command, employed almost solely over the water, to a more suitable camouflage, such as is used by the Fleet Air Arm?

Captain Balfour: The camouflage scheme used for flying boats resembles that employed for aircraft of the Fleet Air Arm. With landplanes, the requirements of camouflage when aircraft are on the landing grounds has to be considered and a different system is in use. Camouflage schemes are, however, kept under constant review in the light of operational experience.

Mr. Mander: Is it not very unsatisfactory that machines that are flying over the sea are not camouflaged in the same way as they are when flying over the land?

Captain Balfour: No, Sir. As I said, these matters are kept under constant review, but unfortunately many of the aircraft which fly over the sea have to spend a great part of their life on land, and therefore their life at sea must take account of their life on land.

Mr. Mander: Perhaps the hon. and gallant Member will allow me to have a word with him on the subject.

BILLETING RATES.

Mr. Roland Robinson: asked the Secretary of State for Air whether he has concluded his examination into the question of billeting allowances for the Royal Air Force in certain Lancashire towns; and whether, in view of the increase in the cost of living, he proposes to raise this allowance to such a level that the persons on whom they are billeted do not lose money?

Captain Balfour: It has been decided to make certain additional weekly payments to billetors who provide services additional to those which were intended to be covered by the billeting rates. The concession is being applied with retrospective effect. The question of the ade-

quacy of the billeting rates themselves has also been under consideration, and I hope that it will be possible to make an announcement in the next few days.

Mr. Robinson: In considering the matter, will my hon. and gallant Friend bear in mind not only that these people on whom soldiers are billeted are carrying on at a small loss, but are also deprived of their usual means of livelihood?

Captain Balfour: Indeed, we are keeping these considerations in mind. I, like my hon. Friend, represent a constituency which has many people billeted upon it, and, as far as the Air Force is concerned, as a Member I have been bringing some pressure upon myself as a Minister.

Mr. Charles Brown: Can the hon. and gallant Gentleman say whether the concession is being made in respect of the Army as well?

Captain Balfour: I cannot answer for the Army.

Mr. Brown: Has there not been any consultation?

Captain Balfour: Yes, Sir, indeed there has.

TRANS-ATLANTIC AIR SERVICE.

Mr. Simmonds: asked the Secretary of State for Air whether he can make any statement with reference to the British trans-Atlantic air services for 1940?

Captain Balfour: As has already been announced, it had been hoped to reopen this important service during the present year. Recent developments have, however, made it necessary to divert the aircraft intended for use on this service to certain defence purposes for which they are particularly suited. Iregret that at the present time defence needs must claim priority and that it will not, therefore, be possible to operate the service this year. I need hardly add that this decision has been taken with reluctance and that every effort will be made to reopen the service as soon as circumstances permit.

Mr. Simmonds: Although these requirements must clearly be afforded priority, could my hon. and gallant Friend assure the House that, seeing that these boats were required for Empire communication services, the matter will be carefully kept


in view from month to month to see whether, in fact, they can be put back on the trans-Atlantic service?

Captain Balfour: Indeed, the matter shall be kept under review to see whether, when defence needs have been considered, these boats can be released, and I would inform my hon. Friend and the House that we are endeavouring to make arrangements that any conversion to military use of these boats shall be of such a nature as not to impede their ultimate use for civil aviation purposes.

COUNTY BROOK MILL COMPANY, FOULRIDGE.

Mr. Tomlinson: asked the Secretary of State for Air whether he is aware that the County Brook Mill Company, Foulridge, who are engaged on Government contracts at their Foulridge mill, are working overtime and being permitted to do so by the Home Office, whilst at the same time refusing to honour trade union agreements regarding overtime rates; and will he inform this company that such action is a breach of the Fair Wages Clause in Government contracts, and call for redress?

Captain Balfour: The firm in question does not hold any contract from my Department.

CENSORSHIP AND PUBLICITY.

Mr. Levy: asked the Minister of Information whether he is now in a position to make a statement on the reorganisation of the methods of the censorship and the relationship in this respect between his Department and the Defence Departments?

The Minister of Information (Sir John Reith): I would ask my hon. Friend to be kind enough to await the statement which the Prime Minister will make later this afternoon.

Later:

The Prime Minister: The House is aware that since 9th October last the Ministry of Information has had no responsibility for the communication of news to the Press or for Press censorship. Each Department is responsible for the issue of its own news, while the central machinery for the communication of news to the Press and for the exercise of Press

censorship has been operated by the Press and Censorship Bureau under the direction of Sir Walter Monckton. In the light of further experience it has been decided that the Ministry of Information shall resume the functions at present performed by the Press and Censorship Bureau. Each Department remains responsible for the issue of its own news either through the Ministry or simultaneously through the Ministry and its own organisation. Subject to advice from the Ministry on general censorship policy, the Defence Departments are responsible for censorship decisions in all matters where it is necessary to prevent information from reaching the enemy. Parliamentary Questions on specific censorship decisions should be addressed to the Minister in charge of the Department concerned with the subject matter. All other questions affecting censorship should be addressed to the Minister of Information.
In order to strengthen the liaison between the Service Departments and the Ministry and to ensure that the Ministry's point of view is adequately presented, the number of senior service officers attached to the Ministry is being increased, and representatives of the Ministry are being appointed to the Service Departments. Existing arrangements by which the Press have direct access to the Departments will remain undisturbed. The Minister of Information has appointed Sir Walter Monckton to be Deputy Director-General of the Ministry. In order to provide for the necessary collaboration between the Foreign Division of the Ministry of Information, which is responsible for publicity in neutral countries, and the Department of Enemy Propaganda under the Foreign Office, the Secretary of State for Foreign Affairs, in agreement with the Minister of Information, has appointed Sir Walter Monckton to be an additional Deputy Under-Secretary of State for Foreign Affairs. These changes will take effect immediately. The Department of Postal and Telegraph Censorship, formerly under the War Office, is being transferred forthwith to the Ministry of Information.

Mr. Levy: While saying at once that this statement will give general satisfaction throughout the country, may I hope that under the new organisation those conflicting statements which we see from


time to time in the Press will be avoided and that there will be somebody in control who will be the deciding factor?

The Prime Minister: "Hope springs eternal in the human breast."

Sir Stanley Reed: Will other Government Departments with publicity organisations be under the general direction of the Minister of Information, or will they work independently and be responsible only to their departmental heads?

The Prime Minister: If my hon. Friend will study the answer I have given, I think he will find that his question is answered there.

Mr. Garro Jones: The Prime Minister has stated that the postal censorship is being transferred to the Ministry of Information. Does that mean not only a prima facie censorship of the contents of telegrams, but an investigation into the authenticity of telegrams and their senders, particularly in regard to foreign telegrams, of which 88,000 are sent out each week?

The Prime Minister: I must have notice of that question.

MINISTRY OF INFORMATION.

GERMAN FREEDOM STATION (FILM).

Sir Richard Acland: asked the Minister of Information what German national has been introduced by an agent of the Government as being suitable to advise the producers of the film dealing with the German freedom station now being made with the approval of his Department from the German point of view; and what was the previous occupation of this German national?

Sir J. Reith: I have no knowledge of the particular point referred to by the hon. Member. The script of this film was submitted for approval by the producers, but otherwise the Ministry has had nothing to do with it.

Sir R. Acland: Will the Minister allow me to make to him some private representations?

Sir J. Reith: indicated assent.

INCOMING LETTERS (CENSORSHIP).

Mr. Tinker: asked the Minister of Information what procedure is followed in opening and examining letters sent to

this country from other countries within the Empire?

Sir J. Reith: There is no censorship in the United Kingdom of letters sent to this country from other countries within the Empire.

Mr. Tinker: Is the Minister aware that I have had one sent to me from my sister in Australia which has been opened and censored, and that that is why I am making inquiries?

Sir J. Reith: The letter was opened in Australia.

Mr. Tinker: Surely that is dodging the issue. However, I have an answer for the time being, and I shall put down another Question.

Mr. Maxton: Would the letter that I have received from my constituency be opened in Australia also?

Sir J. Reith: I should certainly want notice of that question.

Mr. Thorne: Is it not the fact that the Post Office have for several years claimed the right to open anything they thought improper?

Sir J. Reith: That may be so in war-time.

Mr. Thorne: And any other time?

Sir J. Reith: At the present moment letters from the Empire are not opened in the United Kingdom, and the United Kingdom does not control what happens to letters in any other part of the Empire.

POST OFFICE.

SCALE PAYMENT SUB-OFFICES (CONDITIONS).

Mr. Leonard: asked the Postmaster-General (1) how many cases were reported during 1939, where hours of attendances, wages or other conditions appeared to be unsatisfactory in scale payment sub-post offices;
(2) whether he has made inquiry into the present conditions of employment of assistants employed at scale payment sub-post offices; and, if so, what was the result of the inquiry, with special reference to wages, hours and general amenities for work?

The Postmaster-General (Mr. W. S. Morrison): No central record is kept of complaints of this kind, and no general inquiry has been instituted. The standing rules of the Department provide that the conditions of service of assistants employed on Post Office work at scale payment sub-offices should be not less favourable than those of shop assistants of about the same standing in the service of good employers in the same district. So far as I am aware, these rules are being complied with, but I shall be ready to investigate any cases which the hon. Member may wish to bring to my notice.

Mr. Leonard: Is it not the case that supervision of these sub-post offices is provided for in orders or regulations; and, as regards wages and conditions, why should assistants, performing postal services, have their working conditions entirely determined by relation to shop assistants in general, instead of workers performing similar services in the Post Office?

Mr. Morrison: These assistants are not servants of the Post Office but of the sub-postmasters who employ them to do the work of the post office and also, very often, the work of a shop. The sub-postmaster is obliged to give a return of the conditions of work and duty to the postmaster who has to see that they are no less favourable than the conditions generally prevailing.

Mr. Leonard: Is the right hon. Gentleman not aware that a recent decision in the High Court made it quite clear that a postmaster himself is an employé of the Post Office? Therefore, can those working under him not be considered as employés of the Post Office?

Mr. Morrison: I should want notice of that question.

TRANS-ATLANTIC RADIO-TELEPHONE SERVICE.

Mr. Roland Robinson: asked the Postmaster-General whether he has concluded his examination into the possibility of restoring the trans-Atlantic radio-telephone facilities; and what steps does he propose to take in this matter?

Mr. W. S. Morrison: In view of the risks attending the use of radio-telephone services under present conditions, the trans-Atlantic telephone service could not

be made available for public use without the adoption of adequate safeguards. The question whether the facilities could be restored under a system of censorship without undue risk is still under consideration by the appropriate authorities, but a decision has not yet been reached.

Mr. Robinson: In view of the fact that the matter was under consideration two months ago, will my right hon. Friend expedite it?

Mr. Morrison: So far as can be it is a matter of security, and the interests of security must override all others.

ROYAL NAVY.

DEPENDANTS' ALLOWANCES.

Major Sir Jocelyn Lucas: asked the First Lord of the Admiralty whether, in view of the fact that wives in receipt of naval dependants' allowances in the London area get 3s. 6d. a week more than those residing in Portsmouth and in view of the fact that the dockyard workers in Portsmouth have been granted a weekly bonus of 5s. for the extra cost of living, he will now take action to remove this anomaly?

The Parliamentary Secretary to the Admiralty (Sir Victor Warrender): The recent increase in the bonus paid to male dockyard workers, to which my hon. and gallant Friend refers, was made in pursuance of the Government's undertaking to observe in the regulation of the wages of its industrial employés the principles of the Fair Wages Resolution of the House of Commons. This increase was not confined to Portsmouth but was applied throughout the country, and workers in the London area receive a higher rate of bonus than those employed elsewhere. I cannot therefore agree that an anomalous situation has been created which would necessitate the extension to Portsmouth of the additional allowance which is now paid to the dependants of men in the Services, living in the London postal area.

Sir J. Lucas: Is the hon. Gentleman aware that there is a very real sense of grievance in this matter?

Sir V. Warrender: If my hon. and gallant Friend will read the answer, he will see that the grievance is not well founded.

NORWAY (INVADING GERMAN WARSHIPS).

Mr. Garro Jones: asked the First Lord of the Admiralty the hour of arrival of the first invading German war ship in any Norwegian port and in Narvik; and the hour and date at which the Admiralty received this information?

Sir V. Warrender: I would prefer not to make public information of this kind.

Mr. Garro Jones: Is the hon. Baronet not aware that certain events gave rise to some doubt about the reliability of our information service and, in particular, the belief that 48 hours elapsed between these two events? Can he assure the House that the belief is not well founded?

Sir V. Warrender: I am quite prepared to give the hon. Gentleman the definite assurance that the belief is quite wrongly founded.

WAR RISK ALLOWANCE.

Mr. Ralph Beaumont: asked the First Lord of the Admiralty whether he has yet considered the question of granting a war-risk allowance to the personnel working on, but not forming part of the crews of yard craft, in view of the fact that an increase of pay for the masters and crews of these craft when engaged on work in dangerous areas was granted some months ago?

Sir V. Warrender: Yes, Sir. The personnel referred to are eligible for a war-risk allowance for each day or part of a day of 24 hours during which they are on board a yard craft in the open sea.

MOMBASA.

Mr. Creech Jones: asked the Secretary of State for the Colonies whether steps are being taken to implement the recommendations of the committee appointed to inquire into labour unrest at Mombasa last summer; and whether proper housing accommodation will be built and the Government and municipal bodies concerned inaugurate suitable schemes?

The Secretary of State for the Colonies (Mr. Malcolm MacDonald): The answer to the first part of the Question is in the affirmative. The Labour Department has been reorganised and strengthened, and

I am now awaiting the recommendations of the Governor as to the best method of providing proper housing for native labour in Mombasa, and the other matters to which the Commission has drawn attention.

Mr. Creech Jones: In view of the rather grave discoveries made by this inquiry, will the Minister see that the matter is expedited?

Mr. MacDonald: Yes, Sir. We are dealing with the grievances as rapidly as we can.

SINGAPORE (LABOUR DISPUTES).

Mr. Creech Jones: asked the Secretary of State for the Colonies whether he has yet received a report on the strike at Singapore; what steps have been taken to remove the cause of industrial unrest and improve the conditions of employment; and what has been done in respect of the evicted strikers?

Mr. M. MacDonald: I have now received a report from the Governor, which in general confirms the information regarding the origin and nature of the strikes in Singapore given in my reply to a Question by the hon. Member on 31st January last. So far as conditions of employment were a reason for the strikes, these have been improved by a general increase in wages or the grant of a cost of living allowance. There have been no evictions of strikers.

PALESTINE (JEWISH CHILD IMMIGRANTS).

Mr. David Adams: asked the Secretary of State for the Colonies what number of Jewish children have been permitted to enter Palestine on special certificates with the assistance of the Refugee Fund; and whether this movement will continue to receive his cordial support?

Mr. M. MacDonald: There are no special certificates for Jewish children wishing to enter Palestine outside the periodic quotas. Several thousands of Jewish children have been admitted to Palestine in recent times in various categories under the quotas as orphans, students or dependants of permanent residents or of immigrants, and I under-


stand that a number of those who have entered Palestine in this way have been assisted to do so by charitable organisations. Figures are not available, however, to show what proportion of the total number have received such assistance.

Mr. Adams: Does this movement receive the Minister's cordial support?

Mr. MacDonald: Yes, Sir.

Mr. Leach: Will the Minister say what he means by "recent times"?

Mr. MacDonald: Some thousands have gone in during the last 12 months.

TRINIDAD (LABOUR CONDITIONS).

Mr. David Adams: asked the Secretary of State for the Colonies the measures taken for the removal of unrest and distress in Trinidad arising from the high cost of living, low wages, unemployment and kindred causes?

Mr. M. MacDonald: As the reply is rather long, I will, with the hon. Member's permission, circulate it in the Official Report.

Following is the reply:

Joint conferences between the employers' associations and the trades unions in the sugar and oil industries in Trinidad were held with the Governor in January. As a result, the standard wage rate in the oil industry was increased by two cents an hour, and in addition a war bonus was instituted, calculated on a cost-of-living sliding scale of half per cent. per hour increase for every complete rise of five points in the Government index figure. In effect this meant an immediate increase in wages of an additional one cent per hour. The union undertook not to request any further increase in the standard wage during the war and six months thereafter, or for two years, whichever period is the longer. It was also agreed to establish a conciliation board to consist of representatives of the Trinidad Oilfields Employers Association and the Oilfield Workers Trade Union, with the Government Industrial Adviser as chairman.

In the sugar industry the union accepted provisionally an offer of the manufacturers to increase the wages of

the field and factory workers by five cents a day or task and to forego a deduction of 13 cents a ton on the price of the farmers' cane to which they were entitled under the Cane Farming Control Ordinance. Three of the Committee of the Joint Sugar Board were appointed to inquire into wages to be paid for the crop season of the present year and the price to be paid to cane farmers for their cane, as well as to advise the board on general cultivation. The Government of Trinidad has made orders regulating the prices of certain essential foodstuffs. It has also made funds available to provide meals for necessitous children during term time and has increased the provision for supplying milk to school children.

BRITISH GUIANA.

Mr. Paling: asked the Secretary of State for the Colonies (1) whether he has considered the resolutions passed at a large meeting of the organised workers of British Guiana asking that the general elections for seats in the Legislative Council shall be postponed from the autumn of this year until the requisite changes have been made in the Constitution to extend the franchise and reduce substantially the margin between the qualifications for registration as a voter and those for membership of the Legislative Council; and what is the nature of his reply;
(2) whether he has considered the resolution passed at a meeting of the organised workers of British Guiana asking him to give immediate effect to Sub-sections (a) and (c) of Section 28 of the recommendations of the West India Royal Commission, so that the working people of the Colony may have representation on the executive and legislative councils of the Colony; and whether he is taking any steps towards that end;
(3) whether he is taking any steps to implement Sub-section (d) of Section 28 of the West India Royal Commission Report; and will he see to it that the workers are adequately represented on the local committees to come within the extension of the franchise?

Mr. M. MacDonald: I have not received the British Guiana resolutions to which the hon. Member refers. The recommendations of the Royal Commission referred to in these Questions are


among those on which I have asked Governors for their early observations, and the hon. Member may rest assured that when these are received I shall give them my early consideration, and I shall certainly bear in mind the points which he mentions.

Mr. Paling: As the Government have been asked to deal with these things quickly, may I ask whether they are likely to receive the Governor's report quickly enough to enable these things to be done before the annual elections, so that the elections may take place in better conditions and under the extended franchise?

Mr. MacDonald: I have asked for the observations of the Governor at an early date, and I expect to receive them in the next few weeks. With regard to the second part of the Supplementary Question, I will bear that consideration in mind in determining what will happen about the date of the election.

Mr. Paling: Would it not be possible to do this, immediately the report is received, without legislation?

Mr. MacDonald: It would be possible, certainly, without legislation in this House to postpone the elections.

WEST AFRICA (IMPORTED GOODS, PRICES).

Mr. Sorensen: asked the Secretary of State for the Colonies whether he is aware of growing discontent among West African farmers and traders arising from the increased cost of imported goods whilst their own produce has a fixed controlled price; whether, in view of the great hardship such a disparity has imposed, he will be prepared to meet a deputation of representative West African natives and others now in London who could put the case of the African grower and trader; and what action he is now taking respecting the matter?

Mr. M. MacDonald: I am aware of the rise in prices of goods imported into West Africa, which is due to increases in manufacturing costs and freights: and I doubt whether any attempt to regulate the prices of such goods directly would be successful. On the other hand, His Majesty's

Government have taken such steps as they could with a view to maintaining the income of the West African producer by purchasing cocoa and oilseeds at prices higher than those which prevailed immediately before the war. These purchases at fixed prices, far from being to the producers' disadvantage, have been the principal, and in some cases the sole, means of preventing the collapse in prices which otherwise would have resulted from the disappearance of the very big pre-war German market for these commodities. I should certainly be willing to consider receiving a deputation on this subject if I were approached by properly accredited representatives of the African growers and traders concerned.

Mr. Sorensen: Is the right hon. Gentleman aware that there is considerable discontent among West African farmers and traders? Further, would he be willing to receive a deputation from those who are actively concerned with the case of the West African growers and traders?

Mr. MacDonald: I should certainly like the deputation to consist of people who can speak for the growers and traders themselves. If the hon. Member has any other suggestion to make, I will certainly consider it.

Mr. Sorensen: Has not the right hon. Gentleman already been approached by representatives of growers and traders to receive a deputation?

Mr. MacDonald: I am not aware that I have been approached with a view to receiving a deputation. I have received a long and carefully reasoned memorandum on the subject from certain West African representatives in London, and I have sent them in the last few days an equally long and carefully reasoned commentary on their observations.

TRANSPORT.

MILK MARKETING BOARD (BUS SERVICES).

Commander Sir Archibald South by: asked the Minister of Transport what omnibuses, in consequence of the user by the Milk Marketing Board of their premises at Thames Ditton, have been diverted from other districts to the relief of the local traffic; and from what district or districts?

The Minister of Transport (Captain Wallace): I am informed that the single deck motor omnibus services passing the Milk Marketing Board's premises at Thames Ditton have been maintained at pre-war strength and no buses have been transferred from other districts. The Board's premises are conveniently served by trolley bus service No. 602, and extra trolley buses are being run on this route to deal with the traffic; next month the service on this route during peak hours will run at eight-minute intervals instead of 10 minutes as at present.

Sir A. South by: Does the answer of my right hon. and gallant Friend mean that there has not been any congestion or interference with local traffic conditions by reason of the use of these premises by the Milk Marketing Board?

Captain Wallace: That is what I am informed.

CANALS.

Mr. James Hollins: asked the Minister of Transport what representations he has received from the canal interests on the subject of financial assistance; and whether he will take immediate measures to alleviate the difficulties encountered by inland waterways on account of war conditions, and so enable them to play their full part in the national transport system?

Captain Wallace: Representations have been received from the Canal Association and the National Association of Canal Carriers as well as from certain canal companies, and are being discussed with the associations. As regards measures to secure the fuller use of canals, I would refer the hon. Member to my answer to Questions on this subject on 20th March. I hope that, with the co-operation of the canal industry, it will be possible to bring at least some of those measures into operation without delay.

Mr. Ede: Is the Minister in touch with the railway companies about canals owned by the railways?

Captain Wallace: We are in touch with all those interests.

RAILWAY REFRESHMENT CHARGES.

Mr. Burke: asked the Minister of Transport whether he is aware that three privates in His Majesty's Forces travelling from Blackpool to Aldershot were

charged 2s. 6d., 2s. 3d. plus 3d. service, for three cups of tea only, in a London Midland and Scottish Railway dining-car; that the London Midland and Scottish Railway controller in correspondence states that such charges are quite in order; whether these high charges have his approval; and what steps he proposes to take to protect the travelling public generally, and His Majesty's Forces specially, from this form of profiteering?

Captain Wallace: I am advised that the charge of 2s. 3d. plus 3d. service charge was not for three cups of tea, as the hon. Member suggests, but for three trays with pots of tea and biscuits, that is, 9d. for each tray. The charge was the usual one made on the company's dining cars. Members of His Majesty's Forces in uniform can obtain cups of tea at the reduced charge of 2d. a cup in station refreshment rooms, that is, a penny less than the ordinary charge.

Mr. Burke: Do I understand that these high charges have the approval of the Minister? Has he no control over these high charges? From all parts of the country I am receiving constant complaints. Does he not know that at railway stations soldiers cannot get anywhere near the refreshment places? Surely these men ought not to have to suffer all the disadvantages of long-distance travel and then be fleeced by the railway companies?

Captain Wallace: In regard to the last part of the hon. Member's question, I will certainly be very glad to look into the matter and see whether we can provide further and better facilities at railway stations. As regards meals on dining cars, as it costs a certain amount to run a dining car you cannot expect to have a meal provided at the same price as at a station.

Captain Anstruther-Gray: Why should not dining cars give people fair value for their money?

Mr. Holdsworth: Will the Minister of Transport pay attention to the sense of the House and make representation accordingly to the railway companies?

Captain Wallace: Yes, Sir, most certainly.

Lieut.-Colonel Sir Thomas Moore: As the Y.M.C.A. can supply cups of tea at 1d., why cannot the L.M.S. or the L.N.E.R. do the same?

HIGHWAY CONTROL.

Sir Percy Hurd: asked the Minister of Transport in how many cases, giving dates and names of the councils, he has given decisions adverse to rural district councils under Section 35 (7) of the Local Government Act, 1929, without an inquiry or conference being held by him to ascertain the facts?

Captain Wallace: I regret that I am unable to give the information requested by my hon. Friend, without an examination of every case of appeal under Section 35 (7) of the Local Government Act, 1929, which I do not feel would in present circumstances be justified. An inquiry is held in those cases where it appears that one is necessary in order to establish the facts.

Sir P. Hurd: asked the Minister of Transport why he came to a decision adverse to the Blaby Rural District Council under Section 35 (7) of the Local Government Act, 1929, without holding an inquiry or conference, having regard to the fact that the Minister's predecessor allowed the appeal of the rural district council in the year 1934, after an inquiry when the facts were not then so favourable to the said council?

Captain Wallace: The decision on this case was taken without holding an inquiry or conference, because, as I have already informed my hon. Friend, I was satisfied that all the information necessary to determine the appeal was already available. Both the rural district council and the county council had submitted full statements; and I reached the conclusion that to put the authorities to the trouble and expense of a local inquiry would not be justified. After careful consideration of all the facts, I was satisfied that, in the interests of economy and efficiency in highway administration, the roads in the Blaby rural district should be brought under the direct control of the county council, in common with the roads in all the other rural districts in the county.

Sir P. Hurd: May I ask my right hon. and gallant Friend whether he does not think it a rather high-handed way of

treating a local authority which does its work efficiently?

Captain Wallace: We have had to remember that highway administration economy is best secured by unity of control. I was suggesting that was the case and that in present circumstances we should pay particular attention to economy of administration.

Mr. Watkins: Is not this practice of settling things without consulting anyone becoming rather a bad habit with the Minister?

Captain Wallace: I think this is only the second time I have done it.

RAILWAY FACILITIES (LONDON—NORTH OF ENGLAND).

Mr. Batey: asked the Minister of Transport whether, when fares are in creased, he will see that more trains will be provided for passengers who are now unable to obtain seats between Durham and King's Cross, or that a less price shall be charged for standing in the corridors, or sitting in the guard's van?

Captain Wallace: The passenger train services between Durham and London were reduced to enable a large number of special coal trains to be run from the collieries of Northumberland and Durham to London and the South. It is still necessary to maintain this special traffic, but by transfer of some coal trains to the London Midland and Scottish Railway it was found possible to increase the passenger services on 15th April. The suggestion made in the last part of the Question is not a practicable one.

Mr. Batey: The Minister has not answered my Question. When fares are increased will steps be taken to prevent passengers, especially soldiers, having to stand in the corridors?

Captain Wallace: If we were to do that, it would be necessary to restrict the sale of tickets to the number of seats on the train. I do not think that would be in the public interest.

Mr. Batey: asked the Minister of Transport whether he can state the amount of money obtained by the London and North Eastern Railway Company by running a train of coal from Newcastle to London?

Captain Wallace: Assuming an average load of 500 tons, the gross receipts from a train of coal from Northumberland to London would vary between £425 and £450.

Mr. Batey: asked the Minister of Transport whether he is aware that passengers travelling on Friday, 12th April, from King's Cross to Durham, took seven hours and 16 minutes, although nearly all the journey was by the Flying Scotsman; and will he see that, when fares are increased, there shall be an improvement?

Captain Wallace: The booked time for the journey to which the hon. Member refers is six hours 39 minutes. On 12th April the train was 27 minutes late in reaching Durham, owing to abnormally heavy movements of coal traffic on the line. Delays due to national requirements are sometimes unavoidable in war-time conditions despite every effort to maintain scheduled times.

Mr. Batey: Will the Minister say what is being done to improve this service? The other day I had to wait in Durham 65 minutes, and last Friday 55 minutes. Surely the Minister can do something to improve the position?

Captain Wallace: I could not be more sorry for the hon. Member, but the fact is, so long as it is necessary to haul coal from Northumberland and Durham collieries to London and the South, I am afraid there will be inconvenience on the King's Cross lines. The Railway Executive have done what they can by transferring a number of these coal trains to the London Midland and Scottish Railway system at Normanton.

Mr. Paling: May I ask whether it is not possible to increase the speed of the trains, which at present is very slow indeed?

Captain Wallace: The difficulty is that if we increase the speed, wear and tear are increased, which means an extra demand on steel.

Mr. De La Bère: We have heard all that before.

COMMERCIAL MOTOR-VEHICLES (LICENCE DUTY).

Sir Joseph Lamb: asked the Chancellor of the Exchequer whether, in the case of a commercial goods motor-vehicle

constructed since the outbreak of war, he will provide that the duty payable for a vehicle licence shall not be increased by the vehicle falling into a heavier weight class for taxation purposes than a vehicle of the same design and type constructed before the war if it can be proved by the manufacturers that the increase of weight has resulted from their having been obliged by the Government control of materials to use heavier materials in the construction of the vehicle than those which they used before the war?

The Financial Secretary to the Treasury (Captain Crookshank): The rate of duty payable in respect of a vehicle must be determined by readily ascertainable facts. The question of the extent to which a vehicle is heavier than it would have been but for the unavailability of certain materials is a matter of technical opinion which licensing authorities could not reasonably be called upon to decide.

Sir J. Lamb: Is my right hon. and gallant Friend aware that unless it is altered it will not only be another indirect tax on the industry but a detriment to production in the industry?

Mr. Leach: Is the Minister aware that 20 miles an hour is fast enough for vehicles of that weight?

GOVERNMENT DEPARTMENTS.

INTER-RELATIONSHIP.

Sir Joseph Leech: asked the Prime Minister whether he will move to appoint a Joint Committee of the two Houses, or a committee of large-scale organisers of great trading firms, to make a critical examination of the powers, duties and responsibilities of the Ministries of Supply and Labour, and the Board of Trade, to ascertain whether the inter-relationship of their war effort is efficient, so that if found capable of improvement a reorganisation of those Departments may be ordered?

The Prime Minister: No, Sir. I do not think the proposal of my hon. Friend would be likely to produce the result he desires.

MEMBERS OF PARLIAMENT (CORRESPONDENCE)

Mr. Lipson: asked the Prime Minister whether he is aware that hon. Members are frequently kept waiting


several weeks before they receive replies to urgent letters to Government Departments on matters affecting their constituents; that there is good reason to believe that this delay, which inflicts great hardship on many individuals, is caused by ineffective methods of dealing with correspondence; and will he, by moving to appoint a committee of hon. Members with business experience to inquire into the matter, or by some other means, take steps to find a remedy for the present unsatisfactory state of things?

The Prime Minister: I am satisfied that every effort is made by Government Departments to reply as quickly as possible to letters from hon. Members, and I do not consider that it is necessary or desirable to adopt the suggestion made by the hon. Member. Delay is sometimes unavoidable, particularly when it is necessary to obtain information from outlying naval or military stations or from the detached branches or local offices of civil Departments. It must, of course, be recognised that in present circumstances the pressure upon Departments is intense, and I would appeal to hon. Members on their side to refrain as far as possible from putting questions to Departments that are unnecessary or that entail great labourin order to provide answers.

Mr. Lipson: If Departments are very heavily worked at the present time, is not that an additional reason for ensuring that the methods for dealing with correspondence are the best possible, and has the Prime Minister no other means to suggest for dealing with the delay which occurs, not only here but in those cases where inquiries have to be made?

The Prime Minister: I am sure that the Departments are doing all that is possible in the circumstances.

Mr. Tomlinson: May I put a question with regard to Departments offering advice to hon. Members?

Mr. Speaker: That does not arise out of the Question on the Paper.

CONTRACTS.

Mr. Garro Jones: asked the Financial Secretary to the Treasury whether he is aware that various Government Departments have sent advice in varying terms to local authorities on the attitude they should adopt towards

housing and other contractors who plead that they are unable to fulfil their contracts at the contract prices; whether any administrative machinery or any committee exists through which uniform principles may be applied to the solution of this problem; and, if so, whether he will circulate a statement of what these principles are?

Captain Crookshank: The Departments concerned have discussed together the treatment to be accorded to contractors in respect of rises in wages and increases in the prices of materials. I am not aware that different Departments have given different advice to local authorities, but if the hon. Member has any particular cases in mind, perhaps he will let me have details. I am sending the hon. Member a copy of a circular issued to local authorities in Scotland giving general advice on the subject. I am informed that it has not been necessary to issue any similar circular in England and Wales but that the Ministry of Health has dealt with individual inquiries on the same basis.

Mr. Garro Jones: If the Parliamentary Secretary has discussed this matter with other Departments, how is it that he does not know that circulars in varying terms have been sent to local authorities? If I send him copies of the circulars sent by different Departments will he undertake to see that a common policy is devised for local authorities?

Captain Crookshank: In my reply I invited the hon. Gentleman to be good enough to let me have cases.

Mr. Garro Jones: And in my Question I asked whether the right hon. and gallant Gentleman will act on the information if I send it to him.

Captain Crookshank: I had better see the information first.

MINISTRY OF SUPPLY.

WOOL.

Mr. Woodburn: asked the Minister of Supply whether he is aware of the short time and unemployment in the Scottish hosiery and wool trade, as a result of the present method of wool rationing; and whether he is now in a position to make such alterations as will


enable the factories of Clackmannanshire and other Scottish areas to utilise the plant and labour available?

The Minister of Supply (Mr. Burgin): The latest official figures available, which relate to March, show that short time and unemployment in the Scottish hosiery, and wool and worsted trades were appreciably less than immediately before the war. The rationing scheme at present in force for wool is intended to ensure that the supplies of wool for civilian manufacture are distributed as equitably as possible among wool users, subject to the needs of the export trade. Any modification in the interests of a particular class of user could only be effected at the expense of other users.

Mr. Woodburn: Is the Minister aware that there is some feeling in Scotland that the wool control, being centred at Bradford, rather favours certain manufacturers in that district at the expense of Scottish manufacturers?

Mr. Holdsworth: Not a bit of it.

Mr. Woodburn: It may be a misapprehension, but I think it will be desirable for the Minister of Supply to make it clear that the thing is fairly conducted.

Mr. Burgin: There is certainly no ground for any such belief. It is the endeavour of the wool controller, as of all other controllers, to see that essential raw materials are distributed equitably.

Sir Percy Harris: Can the Minister explain why the wool control was moved from London, the historic centre of the wool trade?

Mr. Leach: Is the Minister aware that the wool control is not located in Bradford, but 13 miles away, and that that is our complaint?

Sir Percy Hurd: asked the Minister of Supply whether he will consider the necessity of increasing the control prices for wool having regard to the exceptional winter, the scarcity of feeding-stuffs, and the increased cost of labour; and whether an early announcement of the increase can be made in view of early sales and seasonal arrangements, shearing, etc.?

Mr. Burgin: The price to be paid for the 1940 clip is now under consideration, and an announcement will be made at as early a date as possible.

Sir P. Hurd: Can the Minister say how soon the announcement will be made?

Mr. Burgin: I have been asked by the National Farmers' Union to see that the price should be communicated by 1st June, and I will do everything to implement that.

Mr. Levy: Can the Minister say what method is being adopted to arrive at this particular price?

Mr. Burgin: Hardly in answer to a Supplementary Question.

IRON AND STEEL SCRAP.

Mr. Mathers: asked the Minister of Supply what steps are being taken to have mementoes of previous wars, in the shape of guns, tanks and other metal objects, utilised for smelting purposes; and whether local authorities are being offered any inducements to scrap such objects and place them at his disposal?

Mr. Burgin: The Iron and Steel Control have for some months past been in touch with local authorities on the question of the collection of iron and steel scrap, and a substantial amount of the material to which the hon. Member refers has already been obtained in this way. The present price of scrap should be in itself a sufficient inducement for local authorities to dispose of unwanted material.

Mr. Mathers: Is there no special action taken by local authorities to get rid of these ugly reminders of the incapacity of statesmen to settle things reasonably?

Mr. Burgin: A quarter of a million letters have been addressed to individuals and organisations on the subject of the collection of scrap.

Sir Irving Albery: Is my right hon. Friend aware that many of the people responsible for these guns, tanks, and so on, still do not know whether the Ministry require them or not?

Mr. Burgin: I hope my reply implies an affirmative answer.

FEEDING-STUFFS (WASTE PRODUCTS).

Lieut.-Colonel Heneage: asked the Minister of Supply what progress is being made among the London and county boroughs to save kitchen waste suitable for livestock?

Mr. Burgin: In reply to a Question by my hon. and gallant Friend on 11th March, I informed him that, according to the records of my Department, 14 county borough authorities were collecting waste products suitable for stock feeding. The latest returns received by my Department show that 20 county borough authorities, as well as three Metropolitan borough authorities, are now collecting kitchen waste suitable for stock feeding. In addition, private collections operate in certain other Metropolitan boroughs and county boroughs. With my hon. and gallant Friend's permission, I will circulate particulars in the Official Report.

Following are the particulars:—

The following Metropolitan and county boroughs are collecting kitchen waste suitable for stock feeding:—


Metropolitan Boroughs.


Holborn.
Woolwich.


Lambeth.



County Boroughs.


Bournemouth.
Middlesbrough.


Burton-on-Trent.
Nottingham.


Coventry.
Oldham.


Croydon.
Oxford.


Halifax.
Plymouth.


Hastings.
Portsmouth.


Hull.
Rotherham.


Leeds.
St. Albans.


Leicester.
St. Helens.


Manchester.
Worcester.

In addition, private collections operate in the City of London and the City of Westminster
and in the following Metropolitan boroughs and county boroughs:—


Metropolitan Boroughs.


Lewisham.
Wandsworth.


County Boroughs.


Birmingham.
Southport.


Burnley.
Wallasey.


Eastbourne.
West Bromwich.


Grimsby.

SCRAP ALUMINIUM.

Colonel Gretton: asked the Minister of Supply whether his attention has been called to improved methods of dealing with scrap aluminium by which it is possible to use safely and efficiently up to 20 per cent. mixed with new aluminium, and an estimated saving may be made of approximately £24,000,000 a year; and whether he is taking any action in this matter?

Mr. Burgin: I am aware of the developments in dealing with scrap aluminium and the question of the best use which can be made of aluminium scrap is receiving constant attention. The Aluminium Controller is constantly reviewing the use which can be made of scrap aluminium in the light of the changing condition of supply and demand, and has a special staff to assist him in regard thereto. I am not clear how my right hon. and gallant Friend obtains his estimate of saving, but if he has any information on the matter which he thinks would be of use I should be very glad if he would be good enough to communicate it to me.

Colonel Gretton: Is my right hon. Friend aware that my information comes from a reliable source or I would not have put it on the Paper? I will gladly let him have it.

Mr. Burgin: I am obliged to my right hon. and gallant Friend. I thought there were one or two noughts too many in the calculation.

Viscountess Astor: Ought not this matter to have been considered before?

Mr. Burgin: My answer shows that not only has it been considered, but there has been a committee dealing with it all the time, with a special staff. I have asked that if there is something unknown to me it should be communicated to me, and my right hon. and gallant Friend has offered to do so.

Viscountess Astor: Has the committee come to any decision after all this time?

FOOD SUPPLIES.

ANIMAL FEEDING-STUFFS.

Mr. De la Bère: asked the Parliamentary Secretary to the Ministry of Food whether he is now in a position to make a statement regarding a comprehensive scheme for the management of feeding-stuffs to secure distributive efficiency throughout every county?

The Parliamentary Secretary to the Ministry of Food (Mr. Lennox-Boyd): Arrangements are now being made to set up throughout the country divisional animal feeding-stuffs committees to assist the Minister to secure the equitable distribution of supplies of feeding-stuffs.


Each committee will have an independent chairman and will consist of the chairmen of the county feeding-stuffs committees in the area and representatives of the manufacturers of feeding-stuffs, and of the wholesale distributors serving the area, as well as a representative of agriculturists. Attached to each committee will be a whole-time executive officer with a small staff who will be responsible to the Minister and will also act as secretary of the committee. The main duty of the executive officer will be to assist each distributor to obtain his proper share of supplies and to distribute them in the manner required by the Minister.

Mr. De la Bère: Does this mean that the existing doubts, dilatations and delays will be avoided, and that we shall really get some action, swift and sure, which will deal with this matter?

Mr. Wilfrid Roberts: How many of these divisional committees will there be?

Mr. Lennox-Boyd: One in each of the Civil Defence divisions.

Mr. T. Williams: Does this mean increased expenses for the distributive services?

Mr. Lennox-Boyd: We hope to avoid that, and to get fairer distribution.

Mr. De la Bère: Are we to understand that the milling combines will not be allowed to have their own way?

POTATOES.

Sir J. Lucas: asked the Parliamentary Secretary to the Ministry of Food whether, in view of the importance of fish and chips in the national diet, he can give an assurance that the established potato crisp companies are receiving an adequate and fair allowance of suitable oils?

Mr. Lennox-Boyd: Yes, Sir.

Major Carver: asked the Parliamentary Secretary to the Ministry of Food whether he will take into consideration the erection of a potato factory in or near Howden, in the East Riding, in view of the fact that this district has an adequate supply of water and electric power; and whether he is aware that this is the centre of an agricultural neighbourhood where the meal produced could be readily distributed by road, rail or water?

Mr. Lennox-Boyd: One of the sites chosen for a potato factory is in Selby, which is only about 10 miles from Howden.

Mr. Robert Gibson: asked the Parliamentary Secretary to the Ministry of Food by what method or methods it is proposed to market the products of the potato-processing factories erected under the aegis of his Department; and whether it is proposed to issue regulations dealing with the matter?

Mr. Lennox-Boyd: The products will be marketed through the ordinary trade channels. It will not be necessary to issue any special regulations in the matter.

Mr. Gibson: Does this mean that these factories will be under the control of private firms and that they will themselves select and control the agencies for the marketing of the products from the potatoes?

Mr. Lennox-Boyd: The flour will belong to the Ministry, which will sell it either direct to the consumers or to the wholesalers for distribution.

BUTTER.

Mr. Cecil Wilson: asked the Parliamentary Secretary to the Ministry of Food whether he is aware that the majority of people in Sheffield do not need or cannot afford the butter ration; and in what districts of the city the full ration is being bought?

Mr. Lennox-Boyd: I am aware that, taking the country as a whole, the full butter ration is not being purchased, but I regret that information is not available respecting individual districts.

SUGAR.

Mr. Parker: asked the Parliamentary Secretary to the Ministry of Food whether a larger ration of sugar can be given to old age pensioners in view of their greater need of protective foods?

Mr. Lennox-Boyd: Sugar is not one of the "protective" foods and I can see no adequate reason for issuing extra sugar to old age pensioners.

Sir T. Moore: asked the Parliamentary Secretary to the Ministry of Food whether, in view of the beneficial qualities of jam, he will consider increasing


the sugar allowance to individual house wives to enable them to make a larger proportion of their annual household requirements than is permissible under the existing allowance?

Mr. Lennox-Boyd: The question of the provision of sugar for domestic jam making is at present under consideration and my Noble Friend hopes to be in a position to make an announcement on the subject shortly.

Mr. Mathers: Will that include consideration of the possibility of making jam out of wild fruits to which there is no proprietary title?

Mr. Lennox-Boyd: Certainly.

MILK.

Mr. Stokes: asked the Parliamentary Secretary to the Ministry of Food whether he will publish a list of the names of those companies who purchased more than 1,000,000 gallons of milk at factory prices during the months of May, June, July, and August, 1939, showing the amount taken and the price paid by each of such companies for each of the months named?

Mr. Lennox-Boyd: The information asked for is not in my possession.

Mr. Stokes: Does the Minister mean that he does not know what is sold to the factories, or does it mean that he is not willing to give these figures?

Mr. Lennox-Boyd: Under Section 17 of the Agricultural Marketing Act, passed by the Labour party when it was in power, it is an offence to disclose these facts.

SLAUGHTER-HOUSES.

Mr. Parker: asked the Parliamentary Secretary to the Ministry of Food what compensation is being paid to the owners of slaughter-houses which have been closed down under the Government scheme?

Mr. Lennox-Boyd: No compensation is being paid or is payable to the owners of slaughter-houses which have not been selected for use in connection with the meat and livestock control plan.

OATMEAL.

Sir T. Moore: asked the Parliamentary Secretary to the Ministry of Food whether, in view of the ease with which

oatmeal can be produced in this country, he proposes taking any steps to encourage its consumption?

Mr. Lennox-Boyd: Yes, Sir. The high food value of oatmeal is being emphasised in the movement for giving guidance to the public on the use of food.

CANADIAN CANNED GOODS.

Mr. Sorensen: asked the Parliamentary Secretary to the Ministry of Food whether he will reconsider the present ban on licences for canned fruit and vegetables from Canada, in view of the importation of such foodstuffs from Australia; and whether he is aware that it is computed that all stocks of Canadian tinned goods for sale will need immediate replenishing by the end of May?

Mr. Lennox-Boyd: The Ministry of Food has become the sole purchaser of canned fruit and vegetables from abroad, and in future licences to import will not normally be issued to private importers. As regards the purchases of canned fruit and vegetables to be made from Canada, it is of the utmost importance to conserve our supplies of Canadian currency for essential war purposes and canned fruit and vegetables cannot be given a high place on the priority list of imports from Canada. As regards the stocks of Canadian canned goods, I am aware that they are being reduced.

Mr. Sorensen: Are fresh imports of Canadian canned goods to be expected in future?

Mr. Lennox-Boyd: I am afraid I cannot add to my answer.

Mr. Sorensen: asked the Parliamentary Secretary to the Ministry of Food whether he is aware that Canadian troops in this country have been unable to procure tinned corn; and whether he will arrange for a suitable supply of this Canadian foodstuff, as the Navy, Army, and Air Force Institutes cannot get an adequate supply of these and similar commodities?

Mr. Lennox-Boyd: The question of importing a supply of canned corn for sale by the Navy, Army and Air Force Institutes is under consideration, and I will let the hon. Member know as soon as possible the decision that is reached.

EGGS

Mr. R. Gibson: asked the Parliamentary Secretary to the Ministry of Food whether he has investigated the circumstances in which the price of eggs was sharply put up by sellers following on the announcement of the invasion of Denmark; what modification of the price-fixing machinery he has found to be required; and whether he has any statement to make regarding the rationing of eggs to secure their distribution at a reasonable price to children and invalids?

Mr. Lennox-Boyd: The recent increase in the price of home-produced eggs is due to the increased demand as a result of Danish supplies being cut off. The prices of home-produced eggs are at present uncontrolled, but the Ministry of Food announced on 22nd April that, having regard to the present supply of home-produced eggs, there is no reason why retail prices should exceed the present level of 2s. 3d. for eggs of standard grade, and that if it should be found necessary, the control of prices of home-produced eggs would be reintroduced. The prices of imported eggs are controlled by a Maximum Prices Order. In reply to the last part of the Question, the rationing of eggs is not at present contemplated.

Mr. Gibson: Has there been any increase in the cost of production of home-produced eggs since Denmark was invaded by Germany?

Mr. Lennox-Boyd: The price was fixed after consultation with the Ministry of Agriculture.

Mr. T. Williams: Instead of having control, then de-control, and then re-control, of prices, would it not be far better to control them all the time at reasonable prices?

Mr. Lennox-Boyd: As the hon. Member knows, if maximum prices for eggs were fixed, they would tend to become the minimum prices, and that we want to avoid.

COAL SUPPLIES, BURNLEY.

Mr. Burke: asked the Secretary for Mines whether he is aware that there is a shortage of steam coal in Burnley which is making it extremely difficult for mills to keep running; and will he take action immediately to prevent looms becoming idle, and workpeople unemployed, as has happened on previous occasions?

The Secretary for Mines (Mr. Geoffrey Lloyd): Except when delivery was made impossible by snow, no case has come to my notice of the stoppage of any mill in Burnley due to shortage of coal, although I am aware that a number of them have had to rely on day-to-day deliveries. The arrangements which are already in force to maintain these deliveries will continue until more regular and adequate supplies are assured.

Mr. Burke: Is the Minister not aware that many firms, the names of which I have supplied to him, have had to close down because they have not been able to maintain their supplies? Will he do something to get the stocks back again to something like normal?

Mr. Lloyd: The hon. Member will see from the terms of my reply that no stoppages have been brought to my notice except those when snow made delivery impossible. I am aware, however, that there has been anxiety in regard to the stock position in the area.

Mr. Silverman: Does the Minister realise that mills in the past have been accustomed to retain stocks of coal which have now been almost entirely exhausted? Will he give facilities as soon as possible to enable them to obtain their stocks again so that the same position will not recur?

Mr. Lloyd: The reason for the depletion of stocks is well known. I do, however, agree with the hon. Member's suggestion.

Mr. George Griffiths: Is not one of the reasons for the depletion of stocks that the coal-face miners in the county of Yorkshire have been penalised?

PUBLIC ASSISTANCE (EVACUATION).

Mr. Parker: asked the Minister of Health whether he is aware that so far the Essex County Council has not paid the fares of any Dagenham parents in receipt of public assistance who wish to visit evacuated children on the grounds that they have no authority from his Department to do so; that the Unemployment Assistance Board issue a free voucher to any of their people on production of the necessary voucher from the Dagenham Council; and whether this anomalous position will be resolved?

The Parliamentary Secretary to the Ministry of Health (Miss Horsburgh): My right hon. Friend has recently amended the Public Assistance Order so as to empower public assistance authorities to pay the fares of persons in receipt of relief on visits to their evacuated children. The attention of the authorities was drawn to this in a circular which he issued on 19th April.

BRITISH ARMY (NORWAY, RATIONS).

Sir T. Moore: asked the Secretary of State for War whether he is satisfied that the necessary steps have been taken to supply the necessary additions or substitutes to the standard rations for our troops operating in Norway?

The Financial Secretary to the War Office (Sir Edward Grigg): Yes, Sir.

Sir T. Moore: Would the Under-Secretary say whether fruit and vegetables are included in this addition to the rations?

Sir E. Grigg: The ration was specially fixed having regard to the climatic conditions at present prevailing in Norway after consultation with my right hon. Friend's practical advisers.

CHARITABLE TRUSTS.

Mr. McEntee: asked the hon. Member for Swansea, West, as representing the Charity Commissioners, how many charity trusts are now registered; and what is the aggregate sum guaranteed by these charity trusts to charities in Great Britain?

Mr. Lewis Jones: (CHARITY COMMISSIONER): With the exception of charities required to be registered under the War Charities Act, 1916, and the Blind Persons Act, 1920, there is no legal provision requiring charities to be registered with the Charity Commissioners, and the Charity Commissioners have no register of charities except those kept by them under the Acts mentioned. If the term "charity trusts" is intended to refer to trusts or other arrangements under which a person undertakes to make voluntary, subscriptions or donations to a charity during a specified period, the Charity Commissioners have no information to show how many such trusts or arrangements are in existence.

Mr. McEntee: Will steps be taken to compile a register, in view of the absolute necessity that some guarantee may be given to the public that these trusts are run as they should be run under the law instead of, as they are being run in some cases, outside the law?

Mr. Lewis Jones: I shall consult my fellow Commissioners on the suggestion made by the hon. Member.

ARMED FORCES (OFFICIAL PHOTOGRAPHERS).

Sir William Davison: asked the Secretary of State for War what arrangements have been made for official photographers to accompany the British naval and military forces in Norway and elsewhere, having regard to the misleading and inaccurate photographs issued in neutral countries by the German Propaganda Department?

Sir E. Grigg: As regards the Navy, I have been informed by my right hon. Friend the First Lord of the Admiralty that arrangements have been made for a number of news-reel camera men to be accredited to units of the Fleet. In addition, photographs are taken by naval photographic ratings and other naval personnel, and my hon. Friend may have noticed recently in the Press a number of such photographs of naval operations in Norwegian waters. With regard to the Army, one officer photographer with Fleet Street experience was specially brought back from France and is at present in Norway. As soon as the situation permits, two more civilian official photographers will follow. Four official photographers have been maintained in France by the War Office since last October. In December, a fully equipped developing section was established at General Headquarters and I am informed that the resulting service is fulfilling the requirements of the Press. A similar but slightly smaller organisation will be in operation in the Middle East within the next fortnight.

Sir W. Davison: Is my hon. Friend aware that the statement he has made will give general satisfaction, as in the late war it was nearly two years before this matter could be dealt with? I am very glad that it is now being dealt with more promptly.

POLICE AMALGAMATION, ZETLAND.

Mr. Leslie: asked the Secretary of State for Scotland whether he is aware of the objections taken by the Lerwick Burgh Council to the amalgamation of the police forces in the County of Zetland under the Police (Scotland) Act, 1857; that this would mean burdening the burgh with 70 per cent. of the total cost, thus adding considerably to the present police expenses of the burgh; and will he withhold issuing an Order-in-Council directing that the Act shall extend to the county, pending further negotiations with the two local authorities concerned?

The Solicitor-General for Scotland (Mr. J. S. C. Reid): My right hon. Friend is aware of the views of the local authorities concerned, and is carefully considering the representations which he has received from the town council. If the Act of 1857 is extended to Zetland, one half of the police expenditure and the whole of the pay of police war reserves will be borne by the State, and my right hon. Friend sees no reason to anticipate that the cost to the burgh would be appreciably greater than its current police expenditure.

Mr. Leslie: Is it not the case that the county council and the town council agreed to share the cost equally, and why, therefore, is that not allowed to stand? Is the hon. and learned Gentleman further aware that the town council have agreed to resign in a body rather than submit to what they consider arbitrary conduct on the part of the Scottish Office?

The Solicitor-General for Scotland: I am not aware of the fact stated in the last part of the question. With regard to the first part, I do not think I can add anything to the statement I have made.

Mr. Leslie: Seeing that the county council and the town council have agreed to share the cost equally, why not let that stand?

The Solicitor-General for Scotland: I do not think that can be done without a special Act of Parliament. If an authority adopts the Act of 1857, it must adopt it with all its financial consequences.

Mr. Dingle Foot: Are we to understand from the original reply that no Order will be made until the representations of the Lerwick Burgh Council have been fully reconsidered?

The Solicitor-General for Scotland: All representations that are made will certainly be considered by my right hon. Friend. I cannot promise an indefinite delay, of course.

DANISH RESIDENTS, UNITED KINGDOM.

Mr. H. Strauss: asked the Secretary of State for the Home Department whether, in view of the occupation of Denmark by the enemy, he can make any statement on the policy of His Majesty's Government regarding Danes resident in this country?

The Under-Secretary of State for the Home Department (Mr. Peake): It is not proposed to treat Danes who are resident in this country as "enemy aliens." Many of them are anxious to assist this country in its struggle against the aggressive tyranny of which Denmark has been made a victim. At the same time full precautionary measures are, of course, being taken in respect of any individuals who, whether possessing Danish or other nationality, are believed to be in sympathy with, or likely to assist, the enemy.

COMMERCIAL TRAVELLERS (LICENSING PROPOSAL).

Captain Anstruther-Gray: asked the Home Secretary whether he has considered representations from commercial travellers that a system of licensing should be introduced with a view to safeguarding their profession and preventing enemy persons from masquerading as commercial travellers; and whether he intends to take any action in the matter?

Mr. Peake: The proposal made in a communication from the National Union of Commercial Travellers is that any person acting as a commercial traveller shall be required to take out a licence on which an annual duty shall be payable; but it does not appear to my right hon. Friend that legislation under which any person who pays the prescribed duty shall be entitled to a licence would have any practical effect for either of the purposes mentioned in the Question.

BUSINESS OF THE HOUSE.

Mr. Attlee: May I ask the Prime Minister whether he has any statement to make in regard to business?

The Prime Minister: We propose to-day to report Progress on the Budget Resolutions at about 9 o'clock, in order to consider the Clearing Office (Spain) Amendment Order, 1940, which, as I informed the House last Thursday, must be approved this week. I might also mention that to-morrow, after the conclusion of the general Debate on the Budget Resolutions, we propose to take the Motion to approve the Papermaking Materials (Charges) (No. 1) Order, 1940.

NEW MEMBER SWORN.

Major Duncan McCallum, M.C., for the County of Argyll.

MESSAGE FROM THE LORDS.

That they have agreed to,—

Torquay Cemetery Bill, with an Amendment.

Orders of the Day — WAYS AND MEANS.

Considered in Committee [Progress, 23rd April].

[Colonel CLIFTON BROWN in the Chair.]

Orders of the Day — AMENDMENT OF LAW.

Question again proposed,
That it is expedient to amend the law relating to the National Debt, Customs, and Inland Revenue (including Excise), and to make further provision in connection with finance."—[Sir J. Simon.]

3.53 p.m.

Mr. Pethick-Lawrence: The longer I live the greater grows my admiration for the British people. We have our faults, but for tenacity, for courage, for a refusal to be put back, the British people uphold a tradition that extends over many centuries, and hold a forefront place in the whole world. When in September last the Chancellor of the Exchequer asked for £1,000,000,000 in the financial year that was then in progress there were many people who supposed that his hopes would be frustrated, but, on the contrary, he was able to tell us yesterday that the British public had responded in full to his demands and had exceeded them by over £50,000,000. The Chancellor is asking for a further £200,000,000 in the current year, £100,000,000 arising out of the extension of the September taxes to a full year and £100,000,000 from further new taxation, and I am confident that if these proposals go through this House, the money will be found. The public will respond in spite of the fact that the Chancellor's proposals are individually open in some ways to grave criticism. As to the totality of this taxation which the Chancellor is proposing, some voices will be raised to the effect that it is too severe. Such critics would prefer that we should continue along the easier path of light taxation, considerable borrowing and a large measure of inflation. My voice will not be raised in support of that point of view. Indeed, had the Chancellor found it appropriate to raise a still larger sum, say, at least half the whole estimated expenditure of the Budget by taxation, I would have given him my support.
The fact is that the problem which confronts the country is how to turn a peace economy into a war economy, and it was, and remains, the business of the Chancellor of the Exchequer to create the financial machinery necessary to achieve that object. Unless great sacrifices are made, sacrifices of the method of life of the great bulk of our population, we shall not be able to give to the forces which are fighting overseas our battles for freedom that support which they ought to receive. We dare not for their sake, we dare not for our own take, hold back the full measure of supply which they ought to have from us, and there is no surer method than that of taxation for enabling that to be carried through.
I criticise the Chancellor not because he imposes severe burdens upon the people in order to divert expenditure from their individual needs to those of the country as a whole, but for his failure in his capacity of controller of the Government economy. We all recognise that at the outset of a great war a good deal of dislocation is necessarily brought about, but we are not now at the outset of a great war, for this is the eighth month since the war started, and I do not need to remind the Committee that we still have more than 1,000,000 persons unemployed. And that is not by any means the whole of the picture. We have not brought back into industrial life large numbers of men who had retired because they thought their work was done, but who, in this emergency, are anxious to come back into industry and help to increase the flow of production.
Then, too, there are the women. What of the places for the 1,000,000 women of whom the First Lord of the Admiralty spoke many weeks ago—indeed, I think months ago? They are all ready and willing to take their part. The Government have found no use for them so far, but they tell us that the time will come when jobs will be looking for men, instead of men looking for jobs. Now this is not merely a cause of complaint to the persons whose services are not being used. It is a grave cause of complaint to the taxpayers who are being asked to give up so much of the products of the country's labour and who see our total production being limited and curtailed by the failure of the Government to utilise the manpower of the country to its full capacity.
I pass from that aspect of the Budget to the character and nature of the new taxation, and, in this regard, the criterion which I propose to apply is that of equality of sacrifice. Our people, as I have said, are fully prepared to bear their burdens. They are fully prepared to undergo great hardships. They are fully prepared to forgo much of what, in peacetime, they regard as the normal activities of their lives. But they demand that if they are to make sacrifices, then sacrifices shall equally be called for from other sections of the population. If, in the days before the war, there had been anything like equality of income throughout the country, the task of imposing taxation which would involve equality of sacrifice, would have been a comparatively easy one. But we all know that, in fact, there was great diversity. At one end of the scale there was a small section of people living in great luxury. At the other end there was a section living in dire poverty. According to Sir John Orr, no less than 30 per cent. of the people of our country and their families are so short of purchasing power that they are ill-nourished and their health falls far short of what it might be. Between those two extremes which I have mentioned, there is an immense number of people of moderate means.
In view of this situation, what do we mean by equality of sacrifice? Should the very poor make any contribution at all? Last September the Chancellor of the Exchequer maintained that they should and he imposed an additional tax of 1d. per 1b. on sugar. We on these benches opposed that tax, and if I understand the later pronouncements of the Chancellor of the Exchequer, he repents him of that deed.

The Chancellor of the Exchequer (Sir John Simon): indicated dissent.

Mr. Pethick-Lawrence: The right hon. Gentleman shakes his head, and I am very sorry to see him do so, because I had hoped that he had repented. Let me tell the Committee why I supposed that the right hon. Gentleman had done so. In the first place, he certainly has promised not to repeat it. He tells us that in his new taxation he has been most careful to avoid any additional tax upon the necessary foods. In the second place,

he tells us that he is drawing from public funds at the rate of no less than £60,000,000 a year in order to prevent further rises in the cost of the necessaries of life, mainly if not wholly food. If the right hon. Gentleman really means that he does not repent of having imposed that increase in a tax on food, what is the sense of first putting 1d. per 1b. on sugar and then preventing a rise in the price of sugar and other things by giving a subsidy in order to keep prices down? At any rate, if the right hon. Gentleman does not repent him of that action, we realise that he is at least taking steps to prevent the evil of his action producing serious fruit.
I shall have something more to say on that subject when I come to the question of the sales tax, but I wish to pass from the consideration of the poorest section of the people, on whom the Chancellor now says he does not propose to place additional burdens, to the other end of the scale, to the people of great wealth. Last September, the Chancellor of the Exchequer put up Surtax and increased Income Tax to 7s. in the £ in a full year. At least that is how it was described. In point of fact, it was something considerably different from that as it affected receivers of income, in the great majority of cases. What it really meant was that in the five or six months of the financial year which were left after the Chancellor's Budget statement on that occasion. Income Tax payers had to find, not 7s. in the £ but in a great number of cases 8s. 6d. and in some cases 10s. in the £ on the amount of income received by them during those months. I have always realised that that was a very substantial increase and though it is true that very few people other than Surtax payers, pay anything like the full amount of Income Tax that would appear from the flat rate to be payable, nevertheless it must be evident that large numbers of well-to-do people would have great difficulty in cutting down their expenditure at such short notice to the extent required by the Chancellor of the Exchequer. Many rich people have great responsibilities and liabilities which they cannot get out of quickly. I shall return to that point presently.
As announced in September last, the Income Tax has now gone up, as it is commonly said, to 7s. 6d. in the £, but in


reality, compared with the months which immediately preceded the beginning of this financial year, the present proposal is a reduction of the taxation imposed in September last. I do not think that statement is open to dispute. The amount of tax which the Income Tax payer had to bear from the date of the September Budget onwards, that is, in the last six months of the last financial year, was greater than the amount which he has to bear under the new proposals. As to the people of moderate means, ranging from the workers who are just above the poverty line to those whose incomes just fall below the Surtax level, they are the people who are mainly attacked by this new Budget. They pay the largest part of the increases in direct taxes and nearly all the indirect taxation. Further, as between the members of this class most of the taxes are regressive, that is to say, the taxes on the lower ranges of the moderate incomes are heavier in proportion to those incomes than the taxes on the higher ranges of moderate incomes. I refer particularly to indirect taxation.
I do not want to go in detail into the individual merits of the right hon. Gentleman's proposals. All taxes are naturally resented, and these taxes will, no doubt, be resented in the same way as others, but that is not necessarily to condemn the selection which the Chancellor of the Exchequer has made. I would, however, question the economy of the proposed postal changes. The postal service is really a commercial service, and I am doubtful whether it is a sound principle to make a commercial service of that kind contribute substantially to revenue. I was never in agreement with what was done before in this respect and I am still less in agreement with what is being done now. Even if some increase were to be imposed, I think the amount chosen is too large. It will affect great numbers of small people and impose a severe burden upon them.
Now I come to the sales tax. By the way, the right hon. Gentleman called it a Purchase Tax. I do not know why he has chosen the longer name when the term "sales tax" is so much better understood. Before I heard the Budget speech, and when thinking over the Keynes proposals and the possibility of alternative proposals being brought forward, I was rather favourably disposed to the idea of a discriminatory Excise and

Customs Tax. What we want to do in our economy at the present time is to sustain the life of the people, which is dependent on necessaries and to induce them to forgo what I may describe as unnecessaries, and to shut off all expenditure which is of a completely luxury character. One way to do that, is to put on discriminatory taxation which will influence people in that direction. When the right hon. Gentleman paused in his speech yesterday and said he had a further proposal to make, I thought he was about to propound something of that kind and, as I say, I was not unfavourably disposed to the idea. But when the right hon. Gentleman came to explain his sales tax and when in answer to a specific question which I put to him, he said that it must be at a flat rate, I began to realise that my hopes were not likely to be realised. For if it is to be at a flat rate, there can be no distinction between luxuries and the other articles which will form the subject of this tax.
On the other hand, he says that there will be certain exclusions. I understand that all necessary foods are to be excluded. I understand also that articles at present heavily taxed in other ways are to be excluded. The Chancellor said something in another connection about not taxing anything included in the cost of living. Does this apply to the sales tax? Are clothes to be excluded, and household requisites like crockery, pots and pans, dusters, brooms, brushes, and so on? If these are not to be excluded from the tax, what becomes of the Chancellor's boast that he is doing nothing to raise the cost of living? If they are to be excluded, we shall be interested to know what remains inside it, and how much the tax is likely to yield. I am not complaining of the Chancellor for not being more explicit for he spoke for over two hours, on many subjects which were all extremely interesting, but we have, in fact, very little data to go on as to this sales tax, and I certainly do not propose, therefore, to form a final judgment upon it to-day. I am sure that, in all parts of the House, there will be an intention to listen carefully to any further statement on this important matter. If the tax be a sound one, it will be supported, but if it be otherwise and if, as I very much fear, it tends further to aggravate the unequal distribution of taxation in the Budget, I am


afraid that we shall have to give the Chancellor of the Exchequer a critical time.
Let me revert once more to the question of the taxes on the people in the higher range. I said just now that I recognised that at the outset of the war they could not contribute more than a certain part of their income. I always thought that what was done in September was as much as could reasonably be faced, but, as the war goes on, habits of life and the whole structure of society will tend to change and the time will come when very much more drastic direct taxes will have to be imposed, because it will only be in that way that the luxurious spending of a certain section of the population can be checked and their incomes adequately brought into hotchpot for the purpose of promoting the prosecution of the war. I would sum up this aspect of the matter by saying that I recognise that it is important to limit expenditure on unnecessaries, but I think this should apply most to luxuries. As I see it, the proposal of the Chancellor of the Exchequer will apply least to luxuries. In general, the reductions will take effect in inverse proportion to the size of the income, and that is a matter for grave criticism. In our Debates on this matter we shall, as an Opposition, try to see how far we can remedy the worst effects of this inequality.
Passing from that matter, I would remind the Committee that the Chancellor of the Exchequer covered in his speech a wide range of subjects, and that it would not be right for me to take up time to-day in going into all of them in detail. Incidentally, he touched on the question of the limitation of dividends and the prohibition, during the war, of bonus shares. Offhand, I would accord a favourable reception to these proposals, but naturally, in common with other Members of the Committee, I shall want to have further details, in order to judge whether the proposals are equitable and whether they go far enough to cover the whole ground.
Two matters to which the Chancellor did not refer yesterday have been the subject of a good deal of controversy in the course of the last few weeks. The first is the question of the prohibition which the Treasury have imposed and the Chancellor has, up till now, sustained

upon conversions by local authorities. I presented yesterday in the form of a Question to the Chancellor of the Exchequer, a special case, in which the Exchequer has to contribute part of the cost of the interest on one of these loans. I was told that there were larger considerations influencing the matter, and, of course, I recognise that that is so. One larger consideration undoubtedly is that the Treasury do not want anything done to queer the pitch of the Government for obtaining loans from the public, but I cannot help feeling that this reason is not conclusive.
In the first place, what is the difficulty of fixing the price of the conversion sufficiently high to make it reasonably certain that in every case the present holder will choose to convert? It would only be a matter of a very small extra percentage over that which the Government are giving to borrowers. If local authorities are told that they can convert, but that they must not fix a price so low that there is likely to be left a number of stockholders who refuse to convert, I think that would be a very simple matter. I cannot see where the difficulty arises. Even if it were otherwise, and a certain number of stockholders insisted upon being paid out, all the money would find its way into investments of one kind or another. It is very difficult for me to see how the Treasury will lose. On the contrary, it seems that by taking the more reasonable course and freeing local authorities from the very heavy and incapacitating burdens which are forced upon them at the present time, the Chancellor will really be benefiting the public revenue instead of injuring it.
I pass from that subject to another, affecting the question of free exchange. I have no hesitation in saying that I do not claim to understand fully the ramifications of this complicated subject, and perhaps the Chancellor of the Exchequer will not mind if I express a doubt whether he himself can say that it is all fully clear, even to his pellucid mind. As the right hon. Gentleman knows, I have a great respect for many of the pundits at the Treasury, but I doubt very much whether those who have control of this matter there have all the wisdom on this subject which exists at the present time. It may very well be that there are people who have constant handling of these matters and who are acquainted with facts


which are not present to the mind of the Chancellor of the Exchequer, or even of his expert advisors. At any rate, I have been told that the decisions of the Government are not always wise. Some of my informers put the matter very much more strongly than that. I will put before the Chancellor of the Exchequer one case that has been put to me, regarding Indian shellac. A Canadian firm requiring Indian shellac goes to an English dealer, and he quotes them 116s. per cwt., having paid the Indian in sterling or in rupees. An American dealer is able to quote 100s. per cwt., having bought rupees with United States dollars on the free market. When he gets paid in Canadian dollars he can convert it back into U.S.A. dollars at the official rate. My informants may be wrong in their information or wrong in their conclusions, but this is what I am told goes on in quite a large number of cases. I think the right hon. Gentleman should look into that side of the matter.
Another informant tells me that it is an open secret that there are holding companies abroad with a nominal share capital, and that they control foreign securities amounting to many millions of dollars, and yet no steps have been taken to secure the surrender of those securities. I do not pretend to know how far these criticisms are justified, but I have a definite proposal to make to the Chancellor of the Exchequer, and I hope that he will give it consideration. As I said, the experts at the Treasury are not in possession of all the information that there is, as they have not had the handling of these matters as many specialists in exchange matters have; and my suggestion is that the Chancellor of the Exchequer might appoint a committee, not to decide, but to advise the Treasury, on these intricate matters. I believe that if he found it possible to appoint such a committee, he might obtain from it information that might at any rate modify his present attitude and might have the result of saving the Exchequer a very considerable amount of foreign exchange which at the present time is lost to it.

Sir J. Simon: I do not at the moment understand the second example which the right hon. Gentleman mentioned as to the foreign exchange.

Mr. Pethick-Lawrence: These holding companies, as I understand, hold foreign exchange, and they are able to dissipate it to the disadvantage of the Treasury.

Sir J. Simon: They are dollar securities.

Mr. Pethick-Lawrence: They are dollar securities. Now, I will revert to two themes which formed part of the speech of the Chancellor of the Exchequer. The first is the matter of the Keynes proposals. I would like to say straight away that the attitude taken by the Chancellor of the Exchequer receives my full support. I gave full consideration to the Keynes proposals, and I came very much to the same conclusion to which the Chancellor himself apparently came. I think they would be administratively exceedingly difficult; I do not think they would work out justly as between one individual and another; and, finally, I do not think they would yield the results which Mr. Keynes apparently thinks they would. I believe that they would so injure the system of voluntary savings that their net result would be comparatively small. I therefore support the line taken by the Chancellor of the Exchequer, and I welcome most heartily the promise which he gave relating to the assessment of means and the exclusion of the first £375 of new savings in that assessment.
The only remaining point relates to post-war conditions. After the last war ending in 1918–19 the country was left with a very heavy burden of debt. We have it to-day. At that time I was not in this House, but I pressed very strongly for a capital levy on all wealth for the purpose of sweeping away at any rate a very large part of that debt, and I believe that there are many people who opposed it then who have since come round to the view that it would have been a good plan for the country as a whole. Before this war started I urged the Chancllor of the Exchequer to impose a different burden—a war tax on wealth to make a contribution towards the cost of the war. He resisted that proposal then, and he resisted it when I put it forward later. But the Government have said—and the Chancellor repeated the statement yesterday—that it is their intention, if they are in office when the war is over, to impose a levy upon increases of wealth during a war. That levy, of course, will not be imposed on those who have not increased their wealth during the war, as I understand the Government's proposal.
The first comment that I wish to make upon it is that it is quite inadequate to meet the requirements. If the debt is increased during the war by several additional thousand million pounds, I cannot see that a levy bringing in a few hundreds of millions, will really achieve the purpose. The Government, of course, are anxious to apply this tax because they say people ought not to make money out of the war. That is quite right as far as it goes, but what the Government are in effect saying is, "We want to restore the position which existed before the war," that is to say the position in which certain people were extraordinarily rich and certain people were extraordinarily poor. That is just what we on these benches do not want to restore after the war, because we believe that that was an ugly structure of society, an unstable one, that it was already decaying and that it will not be possible to restore it when the war is over. The new twentieth century wine cannot be put into the old nineteenth century bottles, and I believe that there are Members in all parts of this House who know that when I say that I am speaking the truth.

4.37 p.m.

Mr. Graham White: In the opening sentences of his speech the right hon. Gentleman the Member for East Edinburgh (Mr. Pethick-Lawrence) expressed his admiration for the fortitude and courage with which the British taxpayer has responded to the demands of the Chancellor of the Exchequer as expressed in the Budget of last September. I would like to say that I agree with the right hon. Gentleman in his expression of admiration. When he went on to say that if further burdens had been imposed he would have supported them and that he believed the public would respond to them, my comment is that the courage of the Government is somewhat behind the determination of the taxpayers of the country.
As the Chancellor of the Exchequer unfolded his Budget yesterday many emotions passed through my mind and no doubt through the minds of other hon. Members. Those emotions varied. One impression in my mind was that the lot of the Chancellor of the Exchequer in these times, at all events, is a highly unenviable one. When he sat down the

only thing which I envied the right hon. Gentleman was the mastery of exposition and pursuasion with which he placed the facts before the Committee. We have learned in past years to admire him for that. I am bound to say, after such thought as I have been able to give to the Budget, that the general reflection in my mind now is whether it is adequate for the scale of events in which this country is moving at the present time. In war-time one finds oneself doing strange and unaccustomed things. I never thought I should live to see the day when I would be questioning the wisdom of a Budget, on the ground of the possible inadequacy of the total expenditure proposed. I am not by any means convinced however that the general outlay of the Budget is such as will achieve the essential purpose which we must face at the present time. We must realise that we have not yet reached our maximum production; that the capacity upon which the civilian is able to draw is fixed and that we can only reach maximum production at the expense of somebody else. I come at once to that vast figure of £2,667,000,000 at which we are aiming. I am profoundly disquieted that that figure should be selected at all. It might have been better if the Chancellor had not taken any fixed figure. After all, what is this Budget for this year? It is not a normal Budget. It is, in fact, a profoundly important statistical review of the situation at the present time, but nothing more.
The Chancellor yesterday mentioned one condition on which the taxpayer would be willing to share the burden, and I will say a word about that later on. There is another condition which applies to the attitude of the taxpayer and the people as a whole. I think they will respond willingly while they are satisfied that the maximum effort of this country is being made. If we adopt a figure of £2,667,000,000, surely that figure could only be accepted on the assumption that the amount of unemployment is to remain somewhere about the figure at which it is to-day. It could only be accepted on the assumption that the million women, to whom reference was made by the First Lord of the Admiralty in a speech some little time ago, will not flow into industry, and that, in general, our preparation for the war will proceed on the same basis and with the same slow progress which


we have experienced since the last Budget. I do not think that that situation can be regarded as satisfactory.
The Budget, of course, presents an opportunity for surveying our domestic affairs and enables us to measure the inconvenience and hardship, if any, that we shall be called upon to undergo. But it is also an instrument, and a most effective instrument, for measuring our war effort in relation to that of other countries. This figure of our total expenditure, of which some £2,000,000,000 is for war expenditure, leaves me disquieted. It is difficult, we know, to make estimates of what may be the efforts of other belligerent Powers, but estimates have been made and have been published, and criticised, and, so far as I know, they stand. One of these estimates is that Germany at the present time must be spending on war purposes a sum of the order of £3,000,000,000, and there are some who would put the expenditure higher. In these circumstances I cannot believe that it is satisfactory to acquiesce in a figure of £2,667,000,000 for the present 12 months. We must have greater efforts than that and the country will, not be satisfied unless it sees clearly that they are being made.
If we are not reaching our maximum output of war materials and the like it is simply because our resources have not been adequately mobilised or with sufficient rapidity. There is no doubt, without taking into account our Colonial possessions, that we and our Allies have an overwhelming superiority over Germany provided that it is brought into the field and mobilised as rapidly as possible. The present difference between our effort and that of the Germans will remain until our resources are fully mobilised. There is no doubt that the joint production of ourselves and France might reach a maximum of £4,500,000,000 expenditure on war alone. We know now that Germany is at her peak expenditure, probably at a figure moving between £3,000,000,000 and £3,500,000,000. That is the setting in which we have to regard this matter.
In regard to the £1,234,000,000 of Revenue to be raised from taxation this year, it is indeed, as the Chancellor said, a formidable figure, in excess of anything which we have attempted to raise in previous Budgets. It is not helpful to make comparisons with the past, because we

are living in a period which bears no comparison with past periods, but most people, I think, would have hoped that there might have been an attempt to raise an even larger proportion of the expenditure from taxation. I hope that the Chancellor has it in mind, following the precedent of the last war and of last year, to have a second Budget in the autumn, so that we may review the situation then.
I turn to the actual proposals of the Chancellor. With regard to the luxury taxes, everyone expected them, no one was surprised, and I think no one will be any the worse. The reduction of the limit of the Surtax and the alteration in the Income Tax are fairly stiff, but they might have been stiffer, and they are certainly fair. With regard to the Purchase Tax, that, again, might possibly be a useful weapon in the fiscal armoury of the country. Like the right hon. Gentleman who preceded me, I can say little about it, because we have been told so little. We do not know what will be the rate of the tax or the field that it will cover. We do not know whether it will suffice to fill an important part of the gap between war revenue and total expenditure. On the assumption that the rate is 5 per cent. and that the field is of the order of from £600,000,000 to £675,000,000, it might be estimated to produce somewhere in the neighbourhood of £35,000,000. That, clearly, will be of little help in checking inflation. If, on the other hand, it is proposed to have a really heavy tax, which will raise several hundred million pounds, even then I shall not be satisfied that that might not also lead to inflation, because, as the tax is to be levied on the wholesale prices, it seems to me likely that the retailer will be driven to impose a somewhat higher addition than the actual rate of the tax levied, and demands for wage increases will arise.
This tax requires very careful consideration. It is true, I think, to say that, in effect, it is the exact opposite of a system of family allowances. The right hon. Gentleman the Member for Spark-brook (Mr. Amery) in a recent speech stressed the fact that in hundreds of thousands of working-class families the important thing is not the actual cost of living but the number of mouths that have to be fed. I think it is true to say that two-fifths of the field over which the sales


tax might be expected to operate, consists of boots and clothing. There you have just the opposite of the scheme of family allowances, which has so much support in this House for it will fall most heavily on the families with children—in the absence of other measures. If it is the object of our war-time taxation, as it ought to be, to see that there is no injustice in the sharing out of the burdens, I see great difficulties in devising a sales tax which will not have such an effect. In the Budget, as a whole, I do not see any safeguard against inflation. We should have liked, in the interests of justice and the efficient carrying out of this war, a system of family allowances in substitution for the heterogeneous mass of allowances made in connection with Income Tax, unemployment assistance, dependants of soldiers and so on Most people are convinced that no further sacrifices should be placed on the rising generation of this country. They have already made a heavy contribution in the interruption of their education. I do not think the country would tolerate any further burden.
I think the Chancellor of the Exchequer is relying for defence against inflation on the great increase in the results of the voluntary savings movement. We cannot speak too highly of that movement, and there is nothing we can do to encourage that movement that we should refrain from doing. I hope it will be successful in an even greater degree than it has been up to now. But when it is put forward as a defence against inflation, I am bound to question whether it will be adequate. The savings of the people of this country, taken as a whole, in any one year may be put at a sum of the order of £600,000,000, of which possibly as much as half is institutional savings of one kind or another. If the gap is to be filled by voluntary savings, the present rate of saving would have to be multiplied at least three times, and I very much doubt whether, in the economic position of the country and the other facts of the case, that can be done. Nevertheless, let us encourage the National Savings Movement, which must be always a valuable support to the country.
I said that we regretted the absence of a system of family allowances. I do not

overlook the fact that if such a system were provided, in isolation, it would be a contribution towards inflation. That applies equally to the £60,000,000 which the Chancellor told us is now being spent on subsidising food prices. That £60,000,000 is merely setting free a considerable amount of expenditure which otherwise would not be available. That is why I feel that the Budget does not really hang together. It does not take account of the fact that we are waging a totalitarian war.
It is said in some quarters that this Budget will bring the war home to us, but I hope that when we are thinking of the inconveniences we shall suffer as a result of the Budget, we shall remember that they cannot so far be ranked very much higher than inconveniences. I think it is better that we should do what, as an island people, we are loth to do: that is, to relate our affairs to those of other countries. This country has been an island so long—it is almost an island still—that we tend to look at things here without taking account of what is happening outside. It will enable us to look at the picture more truly if we consider the hardships which are being endured in other countries. There is no question that life is very much harder in Germany and in France. In Germany there is no limit to the hours of work except the physical endurance of those who work. Actual wages have been reduced, and a proportion of all wages is paid straight into the State in actual taxation—gone for good. Practically everything is rationed; everything is controlled—except falsehood, which is in free supply. These things they endure because it is a slave State. Their lot is to listen, to obey or, if necessary, to die. But they endure those things because they want to win the war—let us not forget that.
We cannot, either for our safety or for our honour, be satisfied with any effort that we are making unless we are convinced that it is at least equal to the effort which is being made by our Allies across the Channel. The majority of the people in this country hardly realise the nature of that effort. In September 6,000,000 men between the ages of 18 and 49 marched to the colours, laying down their tools, their spades and their pens, and at the same time the women flocked to take their places. Some 300,000 women have been recruited into Government service.


That is something to bear in mind. It is a greater man-power effort than we have yet made in this country. Turning to the financial aspect, taxation there is very much heavier than it is here. The general taxation is very considerable and there are a number of other taxes superimposed upon it. But there is one tax by which a contribution of 15 per cent. is sought from every individual of military age who is not in the Army—who is in a reserved occupation. I think there is a great deal to be said for that tax, and I believe it would be welcomed by the people of this country, because it is related to the system of family allowances and the payment of a veterans bonus for our soldiers and sailors on their return.
I hope, when we consider whatever inconveniences and hardships we are called upon to bear, we shall not be unmindful of those which are being borne by our Allies across the seas. I believe the courage of our people is greater than that of the Government. I say to the Government: Do not be frightened. Do not say, "Sufficient unto the day is the evil thereof." I believe that anything the Government propose in the way of increased burdens, will be borne cheerfully by the people, if they are convinced that the money is being properly expended and that there is no waste. I could not support more cordially than I do the words of the Chancellor on that subject yesterday. Subject to the fact that the nation is convinced that we are making our maximum effort, I believe that any burden that the Government may place upon them will be shouldered cheerfully as a method of expressing their will to victory.

5.3 p.m.

Mr. Amery: We all greatly admired yesterday the ability and clarity with which the Chancellor of the Exchequer dealt with a vast and complicated subject. His speech was listened, to with profound attention, and also with growing contentment and relief in more than one quarter of the Committee; on this side, perhaps, when he made it clear that he was not, at any rate in the immediate future, going beyond the steep increases in direct taxation which he had foreshadowed in September, and on the other side even more profoundly when he nailed to the mast the flag of voluntary borrowing and

voluntary borrowing alone. All the same, I think there must have been many in the Committee, and still many more outside, who will have shared the disappointment just expressed by the hon. Member for East Birkenhead (Mr. White) at the general character of that speech. We were, I think, entitled to look forward to a statement which would have clearly and boldly indicated the measure of the effort imposed upon us, if we are to win a war fought against an opponent whose whole economic structure is organised on totalitarian lines, and organised for war. We might have expected, at any rate, some outline of the general prospective programme, not only the programme for to-day or six months' hence, but for the duration of the war, by which the Chancellor hopes to make his contribution to the achievement of that result. Instead, he confined himself in the main to a forecast of what the fighting services might be likely to demand at their present rate of expansion, a rate which both the hon. Gentleman and the right hon. Gentleman who spoke for the Labour Opposition clearly showed to be inadequate, and not to what ought to be our rate of expansion, how it might be raised through the pressure of taxation and in other ways.
More than once he referred to the fact that the figures he was introducing were unprecedented, that is to say, unprecedented in our own history. I quite agree with the hon. Member for East Birkenhead that that is really irrelevant. What is relevant is a comparison, both quantitatively and relatively to our resources, with the effort which France and Germany are making, and, last but not least, with the effort that we could make if we set ourselves to it and organised ourselves as we might. Let me take first of all the case of Germany. After all, it is Germany that we have to defeat. Figures which have not been challenged or contradicted show that Germany is spending at this moment on war purposes alone something in the nature of £3,200,000,000 a year. We have been spending during the last six months at the rate of £1,500,000,000 a year—less than half. We are at this moment spending at the rate of £1,800,000,000, and all that the Chancellor hopes we shall be sufficiently well organised to spend during the coming 12 months is at the rate of £2,000,000,000—not so very much more than half. Even


if you add the total effort of France and put it at £1,000,000,000 a year, it is at most equalling what Germany is doing.
That brings me to another fact which is very vital to the consideration of the whole subject and that is the flying start which Germany has obtained by her past expenditure. In the five years before the war she had spent—the figures have been calculated to allow for differences in rates of wages, in the cost of raw material, and so on—the equivalent of something like £5,000,000,000, as against a total expenditure by France and ourselves of say £2,800,000,000. You have to remember, too, what Germany has acquired, in addition to her expenditure, by her military victories. Think of the addition to her armament power which was acquired by her victory at Munich, the Skoda and Vitkovitz works and the whole engineering and productive power of the slave-driven Czech people. Think what she acquired in Poland. Think even of what she has acquired in the shipbuilding and engineering works in Denmark. All that is additional. In virtue of that previous expenditure on equipment the money that Germany is now spending goes almost entirely into direct war output. A great part of ours is still going into factories, into things which will only produce munitions many months hence.
My right hon. Friend the Prime Minister argued recently that it is a great advantage to us that Germany is nearing the limit of her economic power, and that we still have all this vast margin to make up. That may be a very good argument some day, but at the moment we are faced with the fact that the margin between Germany and ourselves, so far from growing less during the last six months, has widened and, on the figures that the Chancellor gave us yesterday, unless they are drastically changed, will go on widening. In another year from now, that is to say 20 months after the beginning of the war, we shall in our actual productive war effort be further behind Germany than we were when the war started. Surely that suggests that the effort that we should make ought to be on a far greater scale than anything that the Chancellor envisaged yesterday.
I need not repeat all that the hon. Member for East Birkenhead said about the war effort of France. France, as compared with us, saves £400,000,000 a year on the pay of soldiers alone. She fixes all her wages and allows no man to be tempted away from munitions work, as they are being tempted here the whole time, by offers of higher pay in other factories. She taxes every workman for the benefit of the Army, for dependants and for war veterans, and imposes a double tax on any man in a reserved occupation who is of fighting age, a thing that we might well imitate in order to emphasise the fact that men who are reserved are reserved only because it is in the nation's interest to reserve them and that they have no moral right to be in a better position than men in the fighting line.
So much for the comparison with other countries. What about the possibility of a greater effort in this country? The right hon. Gentleman who spoke for the Opposition very truly emphasised the fact that we have not begun to deal with the problem of the statistical unemployed and the vast area of the black-coated unemployed outside that, and the still vaster area of employables who might be brought in—unemployed women and men and women employed in unessential occupations—a tremendous task of organisation. I know quite well that that is a matter, not for the Chancellor alone, but for the Cabinet as a whole. I put it, not as a criticism of my right hon. Friend, but of the Government as a whole, that the fact that he can envisage at this hour a war expenditure of some £2,000,000,000 is a grave reflection upon our capacity to reorganise ourselves. The figure we must aim at achieving, and as soon as possible, is much more like £3,600,000,000 instead of £2,600,000,000, if we are to draw level in war output with Germany within the next 12 months and then begin to gain upon her. That we have to give Germany all that time is indeed gambling with the life of the nation. We cannot afford to go on in a leisurely fashion. We cannot afford to hide from the nation the sacrifices that are wanted. In any case the gap between what we have done so far, or are contemplating doing, and what somehow or other we have to do, and do very quickly, is something far wider than the Chancellor suggested yesterday; and because it is so much wider—perhaps


twice as wide—it throws a very different complexion upon many questions, including that vexed question of compulsory borrowing and compulsory saving. I agree with my right hon. Friend, and the whole Committee would agree, that, while we demand more expenditure as a consequence of increased war effort, we do want, all the time, value for our money. My right hon. Friend will have the whole-hearted support of every Member of this Committee for everything that he does to see that not a penny is spent unnecessarily or uneconomically.
If I may say something about the particular items of the Budget, let me turn first to the indirect taxes. My right hon. Friend has raised indirect taxes on a number of articles of luxury. I wonder whether he has raised them sufficiently. He has estimated that that extra taxation will bring in substantial extra revenue. I suggest to him that at a time like this the best test of whether the taxation is producing the results desired is that it should reduce consumption, for if consumption is reduced, importation is reduced, and the use of shipping is reduced. We want not so much to get more revenue on tobacco, beer and spirits and such like things, as to see that the nation consumes substantially less of them, and I am by no means certain whether he has raised these duties sufficiently.
I will turn to the motor duties. There again my right hon. Friend seems to be satisfied with the increased yield, but I would suggest that that ought to be a cause for disappointment to him. In that connection I was disappointed myself that he made no reference whatever to the possibility of some effective change of taxation to bring about the substitution for petrol-driven lorries of gas-propelled vehicles. There is a great field there for substituting domestic raw material in our transport industry for imported raw material. Germany is compulsorily turning the whole of its domestic lorries on to gas. Why cannot we do the same? A little rectification of the weight reckoned for purposes of taxation to compensate for the extra weight of gas containers is not enough. What is wanted is some substantial bonus that will directly and immediately encourage every type of lorry to go off petrol and on to gas.
I would say a few words about the Purchase Tax. Like the right hon. Gentleman who spoke for the Labour Opposi-

tion, my first inclination was to wonder whether an Excise Duty, with corresponding Customs, whether flat or discriminatory, and coupled with a corresponding drawback upon exports, might not have been simpler in operation. But it may be that there are reasons connected with our international trade agreements that would make that difficult. Anyhow I am not disposed to differ from the Chancellor of the Exchequer as to the particular method, which after long consideration, he believes to be easiest to administer, though I must say that difficulties do present themselves very naturally to one's mind. There is the problem of the small producer who sells direct to the customer, the dressmaker, the shoemaker and so on; and there is the problem of co-operative and multiple shops. However, I am not disposed to pursue any line of criticism. On the contrary. I think that in an emergency like the present we cannot have a fairer tax all round than a general Purchase Tax. It is true that indirect taxation as we have known it in the past has mainly been taxation on the poor, because it has been confined to a few articles which are the necessities or the almost necessary luxuries of the poor, and therefore they have been consumed in a larger proportion to their total income than is the case with the richer classes. That is not true of a general tax on all consumable goods. In their case consumption is the measure of income available for expenditure, and in many respects that is an even fairer standard of taxation than actual gross income.
On the other hand, I am wondering what this tax is likely to produce. My right hon. Friend says that "boldly applied" it is capable of producing a larger additional sum than any other immediately practicable form of tax. But he gave us no indication of how bold he proposes to be. I wonder very much how far his courage will take him. Clearly this tax will not be of any real value unless it both substantially reduces consumption and also brings in a considerable revenue. What is the statistical position? It has been calculated that the wholesale value of the articles he proposes to tax amounts only to something like £600,000,000; in other words, his tax will give only £6,000,000 for each 1 per cent. of the rate of tax. Is he going to make it 5 per cent. or 50 per cent.? I


do not know, but I suggest that a low figure, such as 5, 10 or 15 per cent. is quite inadequate for the kind of purpose the Chancellor of the Exchequer has in view. Something like 25 per cent., bringing in, say, £150,000,000, would, on the other hand, be a real contribution to the problem. He has left out the whole field of foodstuffs. Is that altogether wise? There are many foods which are luxury foods and can bear at any rate some rate of sales tax, especially as the Chancellor of the Exchequer is already spending a great deal of money in keeping down the cost of certain essential foods in the interests of the poorest of our population.
On that point I need scarcely say how wholeheartedly I agree with the hon. Gentleman the Member for East Birkenhead in saying that that policy will remain ineffective and in large measure stultified, unless it is accompanied by some scheme of family allowances. To-day there are hundreds of thousands of children, if not millions, in this country who are not able, even at the prices at which my right hon. Friend keeps down meat and milk and certain other essential commodities, to enjoy these commodities which are so vital to their growing health. Surely at a moment when we have all frankly to face bearing our burdens, all of us, every class, there is at any rate one class whom we want to spare, and that is the children, the hope of our future. In connection with the taxes to be imposed on home consumption, my right hon. Friend pointed out that they would help to encourage the export trade. In a certain sense they do, but it is also necessary to remember that in many instances the export trade can only profitably be conducted on the basis of a substantial home trade, and to cut down the home trade, as you must, then you must have recourse to other and quite unorthodox measures in order to make sure of your export trade.
I would like to say a word in that connection, following what was said on behalf of the Labour Opposition, about the external financial problem. While it is not immediately relevant to the Budget, it is ultimately a very relevant matter as to how far our adverse balance of payments is to be allowed to swell and what effect that is to have upon our exchange, and so

ultimately upon our whole trade structure. On that subject the Chancellor of the Exchequer, very naturally perhaps, said nothing. But it is worth while saying a word or two. I am making no complaint against our having fixed the exchange rate at four dollars. I have never been one of those who thought that there was any real merit in "making the £ look the dollar in the face." We did it after the war with disastrous consequences to the country. In ordinary times and with an uncontrolled exchange there is a good deal to be said in favour of a low rather than a high exchange rate. But to-day there are very considerable objections to allowing the exchange to drop further. For one thing, it means a heavy loss in the value of our sterling securities abroad. If it goes too far, it may imperil the whole structure of the sterling area, that is the Empire and other countries which are on the sterling level. It is vital that we should keep the sterling area solid and together. As long as we do that, smaller fluctuations of exchange will not affect our price level. Once we have a controlled exchange and clearing arrangements with other countries, is there any reason why we should not do what Germany has done so successfully, namely, have different rates of sterling in different markets, and even for different transactions? In any case, I hope that the Chancellor of the Exchequer will listen to those who warn him that there has been an undoubted leakage in various directions through the exchange, and that only a part of the foreign exchange which our exports earned has been reaching the Treasury. It may very well be that the suggestion made from the Opposition Front Bench, that an advisory committee should be set up on this question, ought not to be despised.
I come back for a moment to direct taxation. That undoubtedly may have to go higher yet, and the minimum at which it begins may have to go lower. Those are matters which we may have to face before long. I think that business people generally will thank the Chancellor of the Exchequer for the alterations he has promised to make with regard to Excess Profits Tax and more particularly the needs of depressed industries and industries in process of development. We shall know a good deal better when we hear the details. At any rate, whatever we


can find by taxation, a vast balance remains to be found by borrowing. My right hon. Friend gave no definite figure yesterday, but taking the £100,000,000 that he has got from the 3 per cent. Loan, and something like £300,000,000 from foreign assets that he hopes to liberate, there still remains on his own figure a net £1,000,000,000 to be raised during the year, and possibly a good deal more—I would say, much nearer £2,000,000,000. That difference does enormously affect the whole question of whether we can finance this war without disastrous inflation. We did finance the last war very considerably by moderate inflation, because, owing to the time lag between rising costs and rising wages, and the big profits accumulated, we were able to tap these profits, both through Excess Profits Duty and voluntary lending, to such an extent that we were able to carry on, with the help of credits abroad, for four years of war. Is it really possible when a far larger and more rapid scale of expenditure is required, when the public is much more price-index conscious and much more opposed to profiteering, to think that we can follow the same policy without running the risk that inflation might completely run away with us and destroy the whole basis of our economic life?
How are we to find this great sum by non-inflationary borrowing? Let me just remind the Committee what is the essential difference between a loan and a tax. In both cases the Government take a man's assets for no immediate, tangible, material return, and the immediate result, so far as the burden on the people and the effort of the nation are concerned, is exactly the same. There is no such thing as a "burden on the future" in borrowing; there is a burden on future Chancellors of the Exchequer in having to take money from one set of taxpayers in order to repay another set, but there is no burden on the nation as such. Where, however, the difference lies in the case of a loan is that the lender gets in exchange a legal asset, not a material asset, but a claim on his fellow citizens for ultimate repayment and for a certain rate of interest meanwhile. Undoubtedly that enormously diminishes the hardship on the individual, and it is only because it does so that it makes voluntary lending possible and even, within certain limits, attractive. What I would like to

suggest is that that same reduction of hardship occurs also in the case of a loan, even if it is a compulsory loan, as compared with a tax; for the man who is made to lend is given in return for the assets he has surrendered an asset which at some time or other will be fully repaid and which therefore has an immediate value. The fact is that compulsory lending is really a compulsory conversion, at the bidding of the Chancellor of the Exchequer, of one kind of asset for another.
Is that altogether a new principle? We adopt it to-day in the case of anyone whose assets happen to be dollar securities. Such a person has to surrender them compulsorily to the Chancellor of the Exchequer. Even the Chancellor of the Exchequer's decision to stop dividends beyond a certain point is really an indirect compulsory loan. He hopes that the bulk of the money not distributed will go into war loans. There is no real question of principle in it. Personally, I would sooner have seen the Chancellor, instead of limiting dividends, raise the Excess Profits rate still further, dividing it between Excess Profits Tax and Excess Profits Loan. My right hon. Friend says emphatically that compulsory lending must kill voluntary lending. I am afraid that is no argument at all if voluntary lending fails to get us the amount required, just as it is no argument against universal military service to say it might interfere with voluntary military service—it has not in fact done so. When I heard the Chancellor of the Exchequer take that view yesterday his arguments reminded me of the arguments which he and other Members of Parliament used in 1916 against the introduction of universal military service. If it is necessary, we have got to have it, and it is less unfair and less cruel than the same amount of money taken irrecoverably in taxation.
On the other hand, does it necessarily kill voluntary lending? In the case of compulsory lending the Chancellor can fix his own rate of interest. What would be the effect on voluntary lending at 3 per cent.—I understand my right hon. Friend does not want to go beyond that—if he announced that if he could not get the money he required voluntarily he would raise it compulsorily at 1 per cent. or no per cent.? I think he might find compulsory lending in the background might be a stimulating influence on voluntary lending. As to compulsory lending or


saving by wage-earners, I do not think for one moment that the administrative difficulties are any more insuperable than those which we have to face every day in connection with our existing insurance schemes, or those which thousands of patriotic firms are facing to-day in the organisation of their group schemes for the voluntary lending of money by their workers.
I hope I shall not be doing an injustice to my right hon. Friend if I say, frankly, that in my opinion, at any rate, he has failed to face, or make the House of Commons face, the scale of effort required or the drastic nature of the methods which will become necessary. It seems to me that his Budget is essentially provisional—a stop-gap Budget, one that will not even stop this year's gap but will require to be supplemented before the year is over. I think there is still in it too much of the note of "Sufficient unto the day is the evil thereof" and "Time is on our side." I think that in that respect his Budget has only reflected the general outlook and limitations of His Majesty's Government in the whole field of our war effort. I fully realise that the Chancellor of the Exchequer can only make his contribution to that effort, but it should be a contribution in the light of a clear and comprehensive Cabinet policy. I cannot feel that that clear, comprehensive and whole hearted policy has yet been attained, and that is why this Budget, admirable as it is in many respects, still seems to me to be in essence a Departmental, a Treasury Budget, rather than the manifestation, on the financial side, of a policy of all-out national effort. My criticism is not so much of my right hon. Friend as of the present Cabinet system, which as a whole is—as I have said so often—a congeries or standing conference of Departments and not yet an effective instrument of clear, far-sighted and unshrinking policy.

5.40 p.m.

Mr. Stokes: The right hon. Gentleman the Member for Sparkbrook (Mr. Amery), towards the end of his able speech, in which he used certain expressions which I do not understand, referred to the relative merits of taxation and interest-bearing loans. While I can appreciate the unattractiveness of direct taxation, it is as well to remember that interest on interest-bearing loans eventually has to be found by working people

and that we on this side would prefer substantially increased taxation rather than that a large proportion of the money needed should be raised by interest-bearing loans. We listened to the Chancellor yesterday putting further taxes on beer, tobacco, matches and spirits, and we have heard him and other members of the Government talking about equality of sacrifice. I propose to devote my attention to illustrating one or two ways in which that equality of sacrifice is not being demanded and in suggesting ways in which he might make the equality of sacrifice more equitable, either by relieving some of the taxation he imposed yesterday or, at least, obtaining a further contribution to the cost of the war.
I and others have been wrestling with the Chancellor of the Exchequer for some time over the question of Treasury bills. The Chancellor told us that from the outbreak of war up to 17th February the extra cost of discounting Treasury bills was £4,130,000 and that that sum was divided into two portions—just under £1,000,000 due to the bigger volume of bills discounted and just over £3,000,000 due to the higher rate of interest. He was unable to explain, however, why, with the Bank rate at the same level, that extra cost should be incurred. I will give a comparison of figures. The average rate of discount for the first half of 1939 was 15s. per cent., and the average of the first 11 tenders of 1939 was only 11s. per cent. In both cases the Bank rate was only 2 per cent. I asked the Chancellor a question to which I received noanswer—perhaps I shall get one now—and suggested that the reason why the rate was so high was that there was a syndicate in the City which keeps the rate up at an artificial level. The Chancellor said that really was not the case, but I would like to quote two authorities to him. I have not brought the matter before the Committee without taking some trouble, and I will quote first the financial correspondent of the "Observer" for 19th November:
What the rate would be without the strong control of the circumstances governing the issue by the banks and the bill market can only be conjectured. Under this regime a system has been developed during the past 5½ years that has replaced the competitive tender by a virtual monopoly. Despite the existence of this monopoly, however, it is a fact that with a 2 per cent. bank rate before the war Treasury bills were being issued at around an average of 15s. per cent. discount


and many people are wondering if the higher rate the Treasury is now being forced to pay is justified.
I will quote a further authority, the "Scotsman"—and the Scots are usually right—for 18th December, 1939:
In the first place, the banks keep out of the Treasury bill tender completely and obtain their bill supplies from the bill market. Competition is further stifled by the syndicate of discount houses, which by united action under strong leadership is able to dictate one price to be put in for the whole market.
I suggest that there does exist a syndicate which seems to have a virtual monopoly in the discount of Treasury bills. I have their names, although I do not propose to give them, but they are headed by Seccombe, Marshall and Campion. It is generally recognised in the City that the Treasury discount bill rate is virtually settled by this syndicate. I do not know whether the Chancellor of the Exchequer will deny that such a syndicate exists. Apparently he declines to do so. It has been suggested that the rates might come down if the Bank Rate came down, and we have pressed the Chancellor of the Exchequer on that point. We have tried to find out who does settle this extraordinary business of fixing the Bank Rate on a Thursday morning. The Chancellor of the Exchequer says that he does not, but I find in the City that there are responsible people, including several directors of the Bank of England, who insist that the Bank of England has given it up during the period of the war and that the Bank Rate is actually settled by the Treasury and, therefore, by the Chancellor of the Exchequer himself. If the people who control the bill market cannot be persuaded to come down to a reasonable rate of 15s. or 11s., I suggest that the Chancellor of the Exchequer should exercise the power which the City says he has and bring the Bank Rate down to 1½ per cent. or to 1 per cent. It would lead to a great saving in the general financing of the war.
In regard to the Bank of England, I want to explode a myth which I believe is prevalent. Some people think that the Bank of England creates wealth. I cannot conceive of the Bank of England as anything more than a giant casino with Mr. Montagu Norman as the senior croupier, shovelling round the shekels. He occupies the same position as the croupier of a casino, and can stop the

game in exactly the same way as a casino manager by restricting the number of counters in circulation. I think it is time that the Chancellor of the Exchequer took back to himself and to the Government the power of creating money and took over the issue section of the Bank. There is no reason why it should not be done. May I remind the Chancellor of the Exchequer that in the Middle Ages anyone caught issuing financial credit or money outside the King's Mint was promptly boiled in oil, and I suggest that we should look upon this matter in that light.
There is another important point about the financing of the war which I want to raise. I cannot understand—and I have never had a proper answer to the question—why it is bad business to issue your own money free and good business to have to pay 3 per cent. on your own credit. Everyone is now saying that this is a 3 per cent. war. That is better than a 5 per cent. war, but I should like it to be a no per cent. war. I would recommend the Chancellor of the Exchequer to study what Signor Mussolini has done. He has introduced into Italian financial circulation what are called biglietto di stato, which are notes not issued by the bank but by the State in quantities comparable to the value of the work done in the recovery of the Pontine marshes. I think that we could run this war far cheaper by issuing money to keep pace with the productive capacity of the country.
Let me turn to another point. We are now in the paradoxical situation that we have a war on when everybody is being asked to work longer hours, some people getting more pay and some not, and yet, at the same time, we have a considerable number of unemployed skilled people who could in fact be used to produce real wealth. It is said that there is no money available. That is sheer nonsense. Let me take as an example the building trade. A large number of building operatives are out of work and a quantity of certain kinds of material available—I do not say all kinds of material—but the Government have closed down building development, and these men are out of work. I cannot understand it. About 75 per cent. of the population are busy making goods which are utterly useless except to blow other people's brains out.


There is plenty of money to do that, but when it is suggested that men who are out of work should be put into work to produce real wealth, then it is said that it cannot be done. I ask the Chancellor of the Exchequer to reconsider this matter and to see whether he cannot make some change in the policy of the Government.
I was distressed yesterday at the fact that there was no increase in the Excess Profits Tax. I cannot see how it can be suggested to the people who have to fight that there is equality of sacrifice when you allow people who are making excess profits to hold on to them. I should like to see the Excess Profits Tax put up to 100 per cent. There are a great many people like myself who think it is loathsome and detestable that anybody should make any profits out of the war, and it would have a most salutary effect if the Excess Profits Tax was put up to take the whole lot of excess profits for the financing of the war and thus bring about more equality of sacrifice. The Chancellor of the Exchequer has made up his mind that he will not allow people to make big dividends or allow them to invest their dividends in their own companies. In other words, he says that they must not distribute this money, they must lend it to the Government, and the Government will pay them 3per cent. I think it is better for him to take the lot in taxation rather than put additional interest burdens on the people.
I cannot sit down without saying a word to the Chancellor of the Exchequer about his own faith. It is a distressing thing to some of us that he has not tackled the question of the taxation of land values. On 15th April, 1924, the present Chancellor of the Exchequer made this observation:
The present system of rating is one which discourages development and handicaps building, and at the same time it often fails to secure for the community that contribution which ought to be made from land value created by the efforts of the community as a whole and particularly by expenditure of money out of the rates.
I wish we could get the Chancellor of the Exchequer into thinking that way again. Let me give an example to the Committee which shows the iniquity of a system which allows land to lie idle in time of war. I think the Government should

make it a penal offence for any man to allow valuable land to lie idle. In the borough of Ipswich there is a total area of 8,692 acres, an industrial area in which there is only one cow, and of this area 3,500 acres are absolutely unused, and, being derated, make no contribution to local rates. A statement has been made to the effect that the value of the empty sites for 1940 is equivalent to a 10d. rate, that is, £26,093. Had this been collected, the rates could have fallen from 15s. 10d. to 15s. 4d., but instead they have gone up to 16s. 2d.
There is a further example in the same area. The community has grown, and the power station is too small. The electric light authorities, in collaboration with the municipal authorities, decided to build another power station. They did not choose the most delectable site in the middle of a residential area, but they chose what was, in fact, the worst possible site. It was land which had never been used except to graze a few sheep, situate on the river bank. On the East side there are sewage works, on the North side a sulphuric acid factory, and on the West side gas works. They had to pay £13,000 for 84 acres when they wanted only about half that land, so that really they had to pay over £300 per acre for what they needed, as the landlord would not let one half of the area go without the other. It seems iniquitous that this should be allowed to continue. While we recognise the difficulties of the present situation due to the fact that land value has altered owing to evacuation and other things, surely we ought to make some provision for the period when the war is over. Nothing has been done in this Budget about that.
The easiest way to cure the unemployment is to force all this idle land into use, and the right way to do that is to put a tax upon it and collect its communal value for the community. But you have this absurdity—another example of the inequality of sacrifice. What is considered as useless land is being taken for camps, aerodromes and factories. It is a great secret: it is not in the public interest that we should know what has been paid for it! Does the Chancellor of the Exchequer propose to take back from the landlords the sums which the Government have paid? Does he propose to take 100 per cent. of their excess profits on


land sales for the benefit of the community? If not, the fighting men will say that while they have been asked to go and die for their country, they must first buy the land before they do so.

5.59 p.m.

Mr. Craik Henderson: This is my maiden speech, and I ask for that indulgence which I know I shall require and which is always extended on these occasions. Yesterday the Chancellor of the Exchequer disclosed the enormous sums which we shall have to spend and collect this year and whether we feel that he erred on the side of severity or leniency, the country realises the great advantages which it was that at the earliest possible moment the Chancellor of the Exchequer should have let us know the heavy burdens we have to bear. The country will always face sacrifices willingly if they are told fully and early why and what these are to be. I think too we should pay a tribute to the extraordinary sense of patriotism which has been shown by all classes of taxpayers in meeting the very heavy burdens which unexpectedly they have to meet, and I was glad that yesterday my right hon. Friend paid a tribute to them.
I think my right hon. Friend will realise that, even without any additional taxation, the burden will become progressively more difficult for the ordinary taxpayer to meet. I appeal to him to consider whether methods cannot be evolved which, without loss to the Treasury, might make it more easy for the ordinary taxpayer to meet these very heavy burdens. For example, in the case of Estate Duty, if in the new loans which will be required a provision were made, as was done with certain loans in the last war, that they could be surrendered at par in payment of Estate Duties, it would confer a great benefit on trustees and executors, and I think it would also be of tremendous advantage to the Treasury. Incase of a large estate, where, say, a duty about 50 per cent. has to be met, the trustees may get an overdraft for the time being, but it is their duty to realise securities as quickly as possible and wipe out the debt. This has the inevitable effect of tending to depreciate the value of securities, with the result that the Treasury to some extent loses. I appeal to the Chancellor to consider how far he might ease the burden upon the taxpayers without involving a

loss to the Revenue. I think there are several ways in which this could be done.
Both yesterday and to-day a great deal of attention has been devoted to the necessity, as far as possible, of meeting our very heavy expenditure by taxation rather than by loan, of keeping the gap as small as possible; but I suggest that there is another direction in which this is equally important, and that is with regard to our external payments and receipts. My right hon. Friend the Member for Sparkbrook (Mr. Amery) referred to this in his speech. We all realise the importance, in the Budget, of keeping the gap between income and expenditure as narrow as possible, and although £1,433,000,000 cannot be regarded as small, our taxation does represent a serious attempt to keep the gap within reasonable limits. But I think that in the case of the balance of trade it is of even more vital importance that the gap should, as far as possible, be kept within limits. We must recognise that there will be a very large deficiency—the last Board of Trade figures give us some idea of what that deficiency will be. I am afraid—I should be glad to hear what my right hon. Friend has to say on the matter—there is a danger that this deficiency may tend to increase. In addition to our ordinary peace-time imports, we have now to buy abroad a great many articles for our war effort. We are, for instance, buying aeroplanes from America. This must increase our imports. The President of the Board of Trade is doing his best to encourage and increase our export trade, but I think we all realise that, to put it bluntly, he is batting on a very difficult wicket. Our exports to some countries might at any time fall into the hands of our enemies, just as some of our exports to Denmark and Norway will now be helping the German effort. I should think there is very little hope of our being able, to any very material extent, to increase our export trade.
There are, however, two other adverse factors which are important. We have always relied to a great extent on our invisible exports as credits. We have relied upon shipping and insurance. I do not know what the position is at the present time, but I think these and particularly shipping must have ceased to exist as assets. In view of the heavy payments which we have to make to neutral


shipping I imagine that we cannot regard shipping services meantime as a credit so far as external expenditure and receipts are concerned. Another adverse factor is that this deficiency in external trade can be met only in two main ways—by the transfer of gold, or by the sale of investments abroad. My right hon. Friend is already selling certain of those investments abroad. He has no option, but the result must be that the dividends which we would have got from those investments will disappear, with the consequence that another credit will diminish with each successive sale of our foreign investments. I do not know what the Chancellor calculates our investments abroad to be, but I have seen them put at about £3,500,000,000. That, strangely enough, is the same figure as our investments abroad were calculated to amount to in 1915. One would have thought that after the sale of investments in the last war, our investments abroad to-day would have been substantially lower. That does not seem to be the case, although I do not know whether they are valued by the same method as in 1915. It is obvious that we shall have to face very large deficiencies during the war years.
There is, apparently, only one way in which we can hope to reduce this deficiency, and that is by dealing with our imports. The Chancellor referred to this subject yesterday, and in his broadcast speech last night he made an appeal to people to buy articles manufactured in this country instead of articles manufactured abroad. Is he satisfied that more cannot be done to reduce imports? There are two aspects from which we can consider this matter. One is whether there are any articles coming into this country which are not absolutely necessary for our war effort, or which could be restricted, or done without, if necessary by the introduction of rationing. The other is whether any of the manufactured goods coming into this country could be replaced by substitutes. That is being done in Germany. Could we not apply our productive capacity in this country to the production of substitutes in order to ease the strain on our balance of trade? In peace time that might not be economic, but I suggest that in war time we ought to consider very carefully whether it can-

not be done. If my right hon. Friend does think that imports should be reduced, then I beg him not to hesitate. If he hesitates because he feels there is a danger that by restricting or forbidding those imports, he is likely to affect the morale of the country, I am sure he is wrong. I am sure the people of this country would accept any sacrifice in the way of rationing or restriction which they were shown was necessary for our war effort, and that instead of reducing their morale, it would tend to increase it. I beg my right hon. Friend to consider the subject, and if he is satisfied that it is advisable, I ask him to take his courage in his hands, as he has done with regard to our financial arrangements, and impose restrictions now as a matter of policy rather than later as a matter of necessity, as it might have to be.

6.14 p.m.

Mr. Richards: It falls to my lot to congratulate the hon. Member for North-East Leeds (Mr. Craik Henderson) on his maiden speech. We have all experienced the difficulty which he has experienced in the last half hour, and we all admire his courage in speaking on a very difficult subject. I am sure hon. Members will look forward to hearing him speak again on matters of this sort.
Before I listened to the very suggestive and original speech of the right hon. Member for Sparkbrook (Mr. Amery), I was prepared to speak of the Budget as being one of the greatest we have ever had. There is little doubt about its magnitude; it can only be described as colossal. But I am sure hon. Members were very much struck by the fact that the right hon. Member for Sparkbrook demanded still greater sacrifices than those which have been imposed by the Chancellor of the Exchequer. I think it is true to say that the figures of the present Budget were exceeded by the figures of the Budget of 1921. I know that prices were on a different level then, and I have no doubt that if a correction were made in respect of the difference in prices, the figures for this year would exceed those of 1921; but it may be well to remind hon. Members that in 1921 the total amount raised by taxation was £1,425,000,000, roughly £200,000,000 more than is to be raised by taxation in the present Budget. This shows, of course, the rate at which war expenditure has increased during the last 20 or 25


years, and I am sure that, unfortunately, we must agree with the right hon. Member for Sparkbrook that this does not measure the full extent of the effort we shall have to put forth sooner or later. The right hon. Gentleman's demand, with which I think most hon. Members agree, is that the effort should be made now, because we cannot really say that time is entirely on our side. We might find ourselves in a very difficult situation which would make the task more difficult than it would be if we undertook it immediately. One thing that has put the Budget out of joint is the global figure of £2,000,000,000, the estimate which the Chancellor makes of the cost of the war up to the end of next March. No one knows, and he was quite frank about it, whether that figure will be exceeded or not, but I do not think we can take any credit because it was not exceeded during the last seven months. The Chancellor of the Exchequer has told the Committee that he has not spent the whole of the Vote of Credit for £500,000,000, but that argument cannot apply if we are to put forth an extra effort next year. We may be faced consequentially with the possibility of another Budget before the end of the financial year.
I notice that one item in the Financial Statement has been omitted from the present Estimate. Last year there was an Estimate for Civil Defence of £28,691,000, but on this occasion it is included in the £2,000,000,000 which the Chancellor estimates will have to be spent on war services. I do not think it would give very much comfort to our enemy to know what is to be spent this year on Civil Defence. The sum spent last year included a great deal of capital expenditure, but I take it that the upkeep of Civil Defence will be nothing like the cost of its institution. We all know that there is a movement on foot to reduce the personnel and costs of the A.R.P. services in various respects, and perhaps the Financial Secretary will be able to tell us the reason for taking this particular Estimate out and including it in the grand total. If it gave any information at all to the enemy, it would be of a discouraging kind, because it would show that once we had established our Civil Defence, we were keeping it running efficiently at a much lower cost than the initial expense.
All these items in connection with the war are quite rightly surrounded in

mystery, and we are not able to discuss any of them. Last year the Sinking Fund did not quite cost £230,000,000, but I think the Chancellor of the Exchequer was right in still sticking to that figure. We must remember that with all this borrowing the National Debt is mounting up very rapidly. I take it that the services of the Debt next year will not be covered by the £230,000,000 budgeted for, but that the figure will very likely be considerably more. Another item to which I wish to refer is that of Civil Votes. I find that the White Paper says that there has been a reduction of £37,000,000 in this case from an Estimate of £442,000,000 last year to £404,000,000 for next year. That figure seems to me to be a little misleading, because, if I understand it aright, the actual cost last year was not £442,000,000 for Civil Votes but £414,000,000. That is to say that the Treasury saved last year £28,000,000, which, I think, ought to be credited to the year which has gone. Consequently the actual saving which will take place this year is not £37,000,000, as the White Paper seems to show, but £10,000,000.
There is £2,000,000,000 of war expenditure this year, and in addition to that the total services of the Consolidated Fund amount to £247,000,000. Then we have Civil Votes and Customs and Excise, giving us a grand total of £2,666,000,000. The staggering thought is that out of that grand total, £2,247,000,000 is in respect of war services either for present, future or past war expenditure—£2,000,000,000 is in respect of the war we are waging now and £247,000,000 is in respect of wars we have fought in the past—for all our social services we have a mere £419,000,000. If we attempt to convert these figures into percentages, we shall find that out of the taxation we are taking for this year 84 per cent. is in respect of war and only 16 per cent. in respect of social services. This is a very striking thought indeed. Of this colossal sum, involving as we hear from all sides of the Committee considerable burdens on the citizens of this country, 84 per cent. of it will be spent on wars either past or present. As the Chancellor of the Exchequer said, his first question is how is he to find this colossal sum of £2,600,000,000. I agree with him when he says that there is no ideal way of dividing this sum up, but we are all agreed that it has to be divided as between taxation and loans. The first question the


Chancellor of the Exchequer has to decide is what proportion is to be raised by taxation and what proportion is to be raised by loan.
Let us turn to another question for a minute or two. If we regard this Budget from the point of view of national income, if we take the annual national income—£5,300,000,000—a figure given by Mr. Clark, who is one of the greatest authorities on this very difficult question—we find that the Budget takes almost exactly half of that figure.

Colonel Wedgwood: Does that figure include rents?

Mr. Richards: Yes.

Colonel Wedgwood: That is not income.

Mr. Richards: It is income to some people. I think the right hon. Gentleman the Member for Sparkbrook emphasised the fundamental difference between taxation and borrowing, which it is well we should keep in mind. When a tax is paid the money has gone so far as the individual payer is concerned, but when the money is lent to the Government, as the Chancellor of the Exchequer pointed out yesterday, particularly in his broadcast speech, the money is safe and sound, and is being kept for the lender until the war is finished. In addition to that the lender will be granted a bonus, because he did the good service to lend the money to the country when it needed it. The point I wish to make is that as far as loans are concerned—and I think this point was made by the right hon. Gentleman the Member for Sparkbrook—there is a very serious redistribution of wealth, and we find when we come to the end that certain people have benefited very greatly whereas other people have not benefited at all. The Chancellor of the Exchequer is making a great plea that the small man should save, but we on these Benches feel that the small man has not that surplus which he could lend to the Government. The rich people can lend not only out of their savings, but out of money loaned to them by the banks. This was done on a wholesale scale during the last war. It was not actual savings, but money borrowed by individuals and institutions from the banks for which they obtained more interest from the State by way of loan. The small man cannot do that because he has

not the surplus or the credit at the bank. This is a thing which gives rise to indignation.
We are all in agreement with the Chancellor of the Exchequer in trying to do all he can to keep down the rise in prices, but I do not think the Chancellor can help himself. All this money will be spent immediatey on an extra effort to carry on the war, and that extra effort will have to be remunerated. Consequently extra money will gradually flow into businesses of various kinds and into wages, and this money will be spent upon increased purchases. I am afraid the Chancellor rather too hastily dismissed the Keynes scheme yesterday from that point of view. I fully realize the many difficulties in that scheme, but it is a deliberate attempt to prevent money getting back by way of purchases, which inevitably, I am afraid, will lead to increased prices. I suggest that what we want to do is to increase productivity. The figure of £5,300,000,000 was computed at a time when 12½per cent. of the working population of this country were unemployed. If we get these men back into industry, it stands to reason that the productivity—the total amount of wealth of the nation—will be considerably increased.
Then there is the question of overtime and harder work being done by many people at the present time. That ought to result in a larger total amount of wealth produced. I have tried to arrive at a sum, and I find that one authority puts the increased wealth that might be produced as a result of using these people at about 17½ per cent. That percentage on £5,300,000,000 would bring the total to well over £6,000,000,000. The burden would be eased to that extent because we would be taking out of a larger national income than we were before. It is here that we feel the Government are not, as the right hon. Member for Sparkbrook said, doing all that they might. It is all very well to impose taxation, and we know that taxation is bound to impinge upon certain industries that we want to see thriving, but we want not merely to increase taxation but to put forward such an effort to increase the national income as will make taxation much easier to bear than it is to-day. The criticism which was made by the right hon. Member for Sparkbrook applies to the whole of the activities of the


Government They are really not doing all that they should to use the economic factors that we have in this country so as to make it easier to pay for the war and, at the same time, make it more certain that we win the war, as we ought to do because of the tremendous supremacy we enjoy in the economic field.

6.32 p.m.

Mr. Hely-Hutchinson: I hope I may be allowed to express my appreciation of the sincere and thoughtful speech we have just heard from the hon. Member for Wrexham (Mr. Richards). Twenty-four hours is a short space of time in which to form considered views of what is perhaps the greatest Budget in our history, and it is an even shorter time in which to condense such views within the space of a few words; but, as several hon. Members who can speak with far greater authority than I have already expressed their views, I hope I may not be accused of rushing in where angels fear to tread. The outstanding feature of this Budget is the decision apparently implicit in its structure that we are to pay for at least a half of the cost of the war by borrowing. I say "at least," because even the most optimistic estimates which I have heard of the yield of the Purchase Tax do not exceed £100,000,000; while, on the other side, the figure of £2,000,000,000 for the war expenditure appears to some to be a low estimate.
It would, therefore, seem that in the year on which we are now engaged less than one-half of the expenditure will be raised by taxation and somewhat more than one-half by borrowing. I confess that this is a prospect which causes me considerable alarm. My own fear is that the Chancellor has not yet brought himself to take a sufficient amount in taxation to avoid the evils of what is commonly called inflation. In considering the actual amount we are to borrow, however, we should not allow ourselves to be frightened into thinking of it as a worse burden than it really is. The right hon. Gentleman the Member for Sparkbrook (Mr. Amery) explained that it is in a sense not a burden on the country; it is a burden which has to be borne by some parts of the community and which is of benefit to others. Let us suppose the war will cost something of the order of £10,000,000,000. If one-half of that

cost is to be met by borrowing, we shall increase our Debt by £5,000,000,000. That in itself is a frightening figure, but to-day everyone knows that National Debt, once it has been created, has come to stay, and we should look not upon the astronomical capital figure but on what its service will cost as an annuity. If it is the case that the sweet simplicity of the 3 per cents. is to govern our Government finance for ever, this means an annuity charge of something like £150,000,000 a year.
In considering this charge, it is important to consider not only the size of it but from whence the new money will come and who will be the recipients of that extra £150,000,000. The fact of the matter is that the bulk of the saving that is done throughout the country now is not the rich man's savings but the savings of the man of moderate means, and particularly the aggregate savings of the men of small means. That saving comes through directly in small amounts, but more particularly it comes through indirectly in institutional saving and in such forms as the money that piles up in periods of good employment in the Unemployment Fund and similar organisations. For this reason I do not think we need feel that the actual borrowing of a further £5,000,000,000 is in itself something which will cripple or seriously disturb the future life of the nation.
We must remember, too, that with regard to that small proportion of the £5,000,000,000 which will come from the well-to-do, the high rate of Income Tax and Surtax which they have to pay reduces the effective rate of borrowing of the Government, so that in the case of the highest class of Surtax payers who may happen to have a surplus to lend to the Government, the Government will be paying them only 3/20ths of 3 per cent. per annum, which is less than one-half of 1 per cent., for the use of that money. There is on the other side a rather more serious aspect, and that is the fact that a large proportion of the small savings which are now being collected through the National Savings campaign are being invested by the investors on demand loans to the Government. National Savings Certificates can be cashed at any moment and the 3 per cent. National Defence Bonds can be cashed at six months' notice. In other words, at any time the holders of these securities who may wish


to realise their capital for current spending can throw them on the market, and it may happen that the Government will have to pay them off at a time when they are not able to re-borrow at as favourable rate as 3 per cent.
As the right hon. Gentleman the Member for East Edinburgh (Mr. Pethick-Lawrence) has just come in, I should like to say with what great pleasure I listened to the speech with which he opened the Debate. It is always a pleasure to listen to views, even to those with which one disagrees, put forward with such weight of authority behind them in so unprovocative and so uncontroversial a manner. I would like to mention one point in the right hon. Gentleman's speech with which I find myself in whole-hearted agreement. That is that those who pay Income Tax and Surtax must expect that as the war goes on and increased opportunities arise for employment in war industries the rate of these taxes must increase still further. They must also expect the incidence both of Income Tax and Surtax to be widened. I also agree with the right hon. Gentleman in his suggestion that local authorities should be allowed to convert their loans. I cannot see how that can harm Government finance. On the other hand, I think it will help it because it will reduce still further the opportunities for investment on attractive terms elsewhere and so tend to reduce further the rate at which the Government can borrow.
If there was one part of the right hon. Gentleman's speech with which I found myself unable to agree, it was that part in which that hardy annual the capital levy came up. I realise that that reflected the high ideals of the right hon. Gentleman which lead him and some of his friends to hold an equalitarian view of life. If the ideals that lie behind it are high, I suggest that the ideal behind the opposite view is equally high. We seldom hear that opposite view stated in this House. I suggest to the right hon. Gentleman that in our eagerness to secure equality of opportunity, we are sometimes rather apt to overlook that there is no such thing as equality in capacity for taking responsibility. To those who have thought deeply on the subject of wealth it is impossible to conceive of real wealth except in conjunction with the idea of responsibility for administering it. I

know that there are scrimshankers among the wealthy, as indeed among the poor, but, broadly speaking, wealth is an incentive to and reward for taking responsibility, and it provides in the economic field a means of fulfilment of responsibility. Without any fear I suggest that that is just as high an ideal as that which lies behind the right hon. Gentleman's desire that
The Lord High Bishop orthodox,
The Lord High Coachman on the box,
The Lord High Vagabond in the stocks,
They all shall equal be.
The Chancellor in his restrictions on spending, investments, dividends, exchange, and restrictions in a number of other directions has brought into effect means which tend to direct savings into Government securities. This is a very wise provision and I think it is correct to regard all these methods as part of a comprehensive scheme tending in one direction. In fact, the Chancellor says to those rare individuals who have a small amount of spare cash "Which would you rather do or go fishing? Would you like to lend me your money at 3 per cent. or alternatively would you like to lend it to me at 3 per cent.?" Some of the difficulties with which we were faced in the early part of the war with regard to spending and saving are beginning to pass away with the increased restrictions on the number of things which will be available to buy at a price which we can afford. The initial difficulty with regard to spending and saving was well exemplified by the man who asked what he ought to do if he had 16s. to spare. If he took it to the Government and bought a National Savings Certificate at the end of 10 years the Government would give him back 21s., whereas if he used it to buy a bottle of whiskey the Government got 10s. and would not have to give him back anything at all. A further consideration is that 6s. of the 16s. would go into somebody's taxable income—for instance, the distiller's—and the Government would get part of that as well. There are good reasons for doubt as to the proper use of the 16s., but, at least, it gives us some basis for virtuous reflection when we are in the smoking room.
The Chancellor referred to the Keynes, plan, and I agree most heartily with his conclusions and his decision not to adopt the exact suggestions made by Mr. Keynes. In so doing, I feel that the


right hon. Gentleman performed the difficult feat of reaching the right conclusion by means of a correct argument from a wrong premise. Not only the Chancellor, but Sir Robert Kindersley and even the right hon. Gentleman the Member for East Edinburgh shifted the ground of the discussion to a comparison between voluntary and compulsory borrowing. They were thus induced to assemble at the base of the wrong tree and join in a chorus of barks of orthodoxy. It may be said that Mr. Keynes was not up that tree at all, but had moved to a tree of a different name. Up the tree itself there was my right hon. Friend the Member for Sparkbrook, who responded with appropriate barks of his own. The reason for this false premise, I venture to suggest, is, in the first place, the unfortunate circumstance that Mr. Keynes started by describing his suggestion as a plan for compulsory lending.
Strictly speaking, there is no such thing as compulsory lending. There is taxation or there is lending. Compulsory lending or compulsory borrowing is a contradiction in terms. Its exact parallel is the phrase "the unmarried wife." Mr. Keynes himself realised the disadvantages of adopting the phrase, and later changed the description of his suggestion to "a plan for deferred pay." I do not know whether he consulted the Archbishop of Canterbury before he made the change. The essential alternative to Mr. Keynes' suggestions is a wages tax, and the only respect in which Mr. Keynes' suggestion differs from a wages tax is that Mr. Keynes proposes that the taxpayer shall have part of his money back at some, unstated time in the future. Both Mr. Keynes' plan and the ordinary orthodox method of taxation interfere with voluntary borrowing, because they reduce the sum in the hands of the taxpayer which is available for lending, but there is no proper comparison between the two in the sense of calling one voluntary lending and calling the other compulsory lending.
Further, in discussing Mr. Keynes' plan we ought to recognise how great a service he has done in fixing the spotlight on the one essential element in the whole situation which I fear the Budget does not wholly face, and that is the necessity for restriction of the spending of the masses. That restriction is the thing that is going to enable us to win this war

without inflation. The Purchase Tax in particular and all the various indirect and direct taxes are moves in the right direction to accomplish this end. Indeed, there is no tax in the whole Budget to which I object. I can only say that I wish my right hon. Friend had been bold enough to lay a heavier burden of taxation upon the nation at the present time. I believe this Budget will be politically acceptable. That will be so because it does not make the public face up to the enormity of the problem with which we have to deal. It does not make it face up to the essential point of application of Mr. Keynes' suggestion. I say again that I do not believe in adopting Mr. Keynes' suggestion, but I do think he has thrown the spotlight on the point of which we have to take account. I feel that the right hon. Gentleman's Budget will prove politically acceptable because it does not really face up to the problem. No individual taxpayer wants to face up to it any sooner than he must. For that reason this Budget will doubtless go through without any difficulty, but I am afraid that it is not bold enough to meet the very great requirements of the situation.

6.49 p.m.

Colonel Wedgwood: In his excellent speech the hon. Member for Wrexham (Mr. Richards) said that this was the greatest Budget, but one, which he had ever faced. I think myself that, measured even in sterling, it is far the greatest. We must not take this Budget as being one to raise £1,234,000,000. It is a Budget where for we have to get £2,600,000,000. That is the size of the Budget. Some of that money we raise by taxation; the greater part we raise in the new way. I think it is quite time the Committee realised what that new way is. We have to get the money within the next year; it is coming from all of us, although it is not in the Blue Paper, by what is sometimes called inflation, that is, by a tax upon all our assets, or if not all our assets, the assets of most of us. There is no such thing, of course, as the non-inflationary loan mentioned by the right hon. Gentleman the Member for Sparkbrook (Mr. Amery). If the Government sell our American assets in America that is exactly the same as borrowing the money, and has exactly the same inflationary effect. If they export the gold


from this country, it has exactly the same effect. All these methods of trying to fill the gap or of necessarily filling the gap are inflation. Therefore, we ought to look at this Budget quite differently from the way in which we have looked at all Budgets in the past. It is one of those rare occasions when we must cut our coat according to our cloth. While inflation has been possible on this occasion we may well be faced, in the years to come, with the inability to inflate further. That is one of the difficulties.
The hon. Member for Wrexham spoke of a national income of £5,300,000,000. I asked him whether that included rent and he said that it did. I think he confounded his idea of national income with the national production of wealth. It is the national production of wealth which is vital to the future of this country, and not the national income. The national income includes all things, even rent. The national production of wealth, deducting from the value of the goods the value of the raw materials imported, is a true measure of the productive capacity of this country, and it is upon that, that we must fix our eyes, not upon the amount of inflation, or upon the amount of revenue produced by the taxes in this Budget. We have to cast our minds forward to the possible capacity of this country for the production of wealth. The hon. Member took £5,300,000,000 and added 10 per cent. for the unemployed and additional labour. Of course, we must do better than that. Looking forward, we have to insist upon everybody undertaking maximum production. I agree very often with the hon. Member for Evesham (Mr. De la Bère) who wants maximum production from agriculture. All of us will want that pretty soon. But take the factories. A factory working half-time or with half the machines standing idle is not at its maximum of production, and we must get the maximum production from all these factories. I am not talking about factories which are making armaments, but factories which are producing wealth, making that £6,000,000,000, or whatever it is, which is the maximum national production of a trained and intelligent people.
Then I want hon. Members to look at another question. I do not think the Government has even yet realised that this is an entirely different war from the one

which was expected at first. Half the expenditure in which we have been involved has been due, not to their misapprehension alone but the misapprehension of most of us as to what this war would be. Take the case of the little town of Stone, with 2,500 inhabitants. The last time I inquired they were still spending £100 a week in wages for A.R.P. and various other cognate things. That amounts to more than £5,000 a year, and is £2 per head of the population of that little town. Multiply that instance over the whole country, and we get some idea of what A.R.P. is costing us. As I work it out, it is nearer £80,000,000 than £70,000,000, and that in spite of the fact that in many country districts a great deal of the work is done voluntarily. That is a gigantic expense put upon this country through a misapprehension. There is now not one chance in a million of a bomb dropping on Stone in the next year, and if that millionth chance did come to pass, there is not one chance in a thousand of those A.R.P. people in Stone now, preventing anybody being killed then.
The waste of this system is colossal. Everyone on both sides of the Committee knows that this expense is going on because we have created a vested interest and fear to shut it down. If we look at this question, not from the point of view of what we should like to do, but what we can do next year or the year after, when we are no longer able to borrow, we shall see what we must do in order to carry on this war to a successful conclusion. We have got to cut our coat according to our cloth, to say to ourselves, "What is the maximum production of wealth in this country out of which we have got to feed the workers, produce armaments and out of which we must feed, supply and pay the non-producers?"
I think the Committee will agree that in this Budget we are raising £1,234,000,000 by taxation and £1,400,000,000 by inflation. I ask the Committee to consider what this inflation means. It means that everybody who has fixed interest-bearing securities, everybody whose income is fixed, not the ordinary shareholder but the man who has ground rents or a fixed income from the funds or who holds preference shares or debentures, is finding that his invest-


ment is being deflated. The pound sterling represented in that investment is slowly but gradually declining. He is being hit. But not everybody is being hit. The people who own the factories, who own the machinery, who own agricultural stock, are not suffering from inflation. As the pound goes down, in the pocket of the person who has saved it, the value of the stock and the machines keeps on going up. We are getting, by this system of inflation, an exceedingly unfair taxation. Most of all is it unfair when it is considered that the inevitable result of inflation in every country in the world where it has taken place is that, as the currency depreciates, the saleable value of land rises. Far more than the machinery, which wears out, or the stock, which dies off, the value of the land is rising all the time as inflation goes on. The owners of the land are in the blessed position of being able to improve their position relatively by inflation. They are in an ever better position to extort from the people who have to use the land, a higher price for the privilege of producing wealth from that land.
The hon. Member for Wrexham, whom I will quote again, pointed out that the State, in order to secure that maximum production, must force the people who own the means of production to use them to their fullest capacity, and must force the workers to use the machines to produce the maximum amount of wealth. Let us not forget that the State might also force the owners of land to allow people to produce that wealth. All the wealth about which hon. Members have been talking is ultimately produced belabour out of land. Unless you force the people who own the land and raw materials to allow the man who wants, can and knows how to produce wealth, to do so, the State is positively assisting, by inflation, to prevent the production of the maximum amount of wealth. We keep on coming back to the same point: If you want to win this war you must secure the maximum production. Do not bother about how your taxes are raised but direct your intelligence towards securing from the farmer and the manufacturer the maximum amount of production, and from the landlord, the minimum amount of interference with the possibilities of production.

7.3 p.m.

Mr. Gurney Braithwaite: Listening to the right hon. and gallant Gentleman addressing the Committee with his usual vigour, I found it difficult to realise that to-morrow it will be exactly 25 years since I had to follow him in another sphere and another capacity. In those days he was an inspiring leader for all of us, and I would, if I may, say to him, across the interval of a quarter of a century, what a pleasure it is to see him to-day in such robust health and exhibiting all the qualities necessary for inclusion in a War Cabinet determined to carry this conflict on to a vigorous and successful conclusion. I hope I may yet see the right hon. and gallant Gentleman, my old commanding-officer, serving the country in that capacity and with the same success that he did so long ago.
It was melancholy for some of us to reflect, when listening to the Chancellor of the Exchequer yesterday, that it is only six years ago since the present Prime Minister stood at that Box and introduced the Budget in which revenue and expenditure balanced neatly at the figure of £734,000,000. My right hon. Friend announced to the Committee and the country on that occasion that we had finished with "Bleak House" and were entering upon the first chapter of "Great Expectations." A good deal has happened since that afternoon. The present Chancellor of the Exchequer appears to be engaged upon a composite work which might well be entitled "Bleak Expectations," but, such is the temper and mood of the Committee, that disappointment has been expressed today, not with the size of the proposed expenditure, but that it is not large enough to suit the requirements of the time. I imagine that although the Budget imposes burdens infinitely greater than did the Budget of 1934, it will enjoy a smoother passage through its various stages than was the case six years ago.
I imagine that such discussion and Debate as will take place will centre largely around the proposed Purchase Tax. My right hon. Friend was emphatic in drawing a distinction between a sales tax and a Purchase Tax. I am not criticising or disagreeing in principle with his suggestion, but I complain of the manner in which it was disclosed to the country. My right hon. Friend has committed what is always a mistake on the part of a


Chancellor of the Exchequer by introducing on Budget Day an abstract proposal, leaving trade and business in a state of complete uncertainty as to its incidence. I do not think that the public of this country would have complained if an announcement had been made that a Purchase Tax as high as 25 per cent. was to be imposed, and I doubt whether the effect on business would have been so serious as it must remain until my right hon. Friend clarifies his proposal. I hope that when the Minister replies to the Debate he will be able to give the Committee a good deal more detail about the proposal.
I am sure that the taxpayer will shoulder this and greater burdens willingly, provided he can be convinced by the Government he will get his money's worth, not only this year but in the years which lie ahead. The Committee owe a great debt to my right hon. Friend the Member for Sparkbrook (Mr. Amery) for the very realistic speech he made this afternoon on the subject of future expenditure. If the taxpayer is satisfied that, as a result of the very heavy sacrifices now being called for from him and likely to be called for again in the autumn, in a supplementary Budget, the result will be the thoroughgoing defeat of the enemy, a peace made this time in the enemy's capital, following the complete surrender of the Government or pseudo-Government which may represent Germany at that time, that those who have shrunk from the battlefield will not be found at the conference table, that we shall make peace in firm co-operation with our Ally, France, a peace free from trans-Atlantic interference, he will willingly put his hand into his pocket, realising that the Government this time will back up in conference the victory won with such difficulty in war. I would go further. I would say, because it is time that somebody said it in the House of Commons, since it is most certainly the mood of the country, that we must prepare ourselves in the years which lie ahead certainly to garrison, and possibly to govern, a disintegrated Germany for a very long period of years.
The right hon. and gallant Gentleman opposite who spoke just now emphasised that the era of camouflaged inflation is already with us. The Chancellor of the Exchequer is making a strong resistance,

but he is fighting a plucky but losing battle against inflation. The very fact that we are now spending £60,000,000 a year—a policy which I support—in an attempt to peg the prices of food is in itself an inflationary act and not altogether successful. I am informed that already rabbits, whether out of a hat or otherwise, have doubled in price since the outbreak of the war. Inflation is here. It is merely a question of how far the inflationary progress can be slowed down by active measures of the Government.
That brings me to the borrowing policy with which we are faced. The War Loan of £300,000,000 issued recently was a technical success, but it is not true to say that it was a success from the point of view of attracting the savings of the people as a whole. It was subscribed by the large institutions, which themselves, of course, in many cases represent collective saving, but there was no great rush on the part of the public to invest in that loan. I think the reason is not far to seek. It was launched at a very difficult moment for the taxpayer, when he was endeavouring to find his January instalment. When the Chancellor broadcast last night in admirable language about the necessity for saving, I could not help reflecting that we have not got our loan propaganda into any kind of swing or activity. It is really fantastic that in the eighth month of a desperate and total war His Majesty's Government should find themselves in competition with the Unity football pools for the surplus earnings of the people. I do not speak in any high moral sense. I would confess to the Committee that in happier times I have made many attempts to prophesy the results of the activities of certain football teams in these competitions, and invariably failed, but in time of war that sort of thing should not be permitted by the Government of the day; there should be no competition of that kind for the surplus earnings of the people. The desire of the people of this country for investment and saving for the benefit of the State can well be harnessed to their harmless indulgence in a mild flutter from time to time.
I will return to a project which I put forward to this Committee a year ago, that we might have a Government loan modelled on the Victory Bonds issued in


1919. The Victory Bonds were redeemable by drawings—which is a very respectable method of saying that they were a mild form of lottery—at par. I would like to see the Government issue this year on tap at the Post Office in 5s. unit Liberty Bonds carrying interest at 1 per cent., redeemable by drawings. I believe the Government would get £500,000,000 out of it with good propaganda. I believe that it would appeal to the people in their present mood, and it would certainly draw off from such organisations as football pools money which has no business whatever to be going in that direction.
There is one other point to which I wish to refer; I do so with some diffidence, but I hope the Committee will bear with me. The right hon. Gentleman the Member for East Edinburgh (Mr. Pethick-Lawrence), in the very excellent speech which he delivered to the Committee when this Debate opened, spoke of equality of sacrifice, and he spoke of it in terms in which we in the Committee generally think of it, in terms of direct versus indirect taxation. I would suggest that in time of war direct and indirect taxation are not the only criterion of sacrifice. Last January the Chancellor enclosed in the envelope containing the demand for the January instalment a printed slip bearing a quotation from his speech last September, in which he expressed his confidence that the taxpayer would play his part—I think I am quoting the right words—with the same courage and fortitude as the members of His Majesty's Forces. The members of His Majesty's Forces, of course, received that appeal asking them to conduct themselves with the same fortitude in their capacity as taxpayers as in their capacity as members of His Majesty's Forces. The Committee should seriously consider whether it is entirely equitable that the same people who fight a war should pay for it on the same scale as those who remain at home. There are a great many men serving in this war, all of them still on the right side of 50, who for the second time in their lives have voluntarily enlisted in His Majesty's Forces, leaving behind them businesses and practices while civilian rivals often of military age get hold of their customers and clients. When those men return from the war, as please God they will, it will take two or three years of extremely hard work to get their clients, customers and

businesses back to where they were before their voluntary enlistment.
The suggestion I wish to make to the Financial Secretary is this. Parliament has set up, with the universal approval of hon. Members, machinery for calculating excess profits on the part of individuals in the State. I suggest that the same machinery might be utilised for the calculation of excess sacrifices. A three years' average can easily be applied, and the gap between normal income and service pay can be calculated. The matter might be adjusted in the gratuities paid at the end of the war, but I would prefer a return to a principle applied in the last war, because I think it is a simpler method. There is a perfectly good precedent for it. A preferential rate of Income Tax should exist for service pay, a rate, let us say, of 5s. as against 7s. 6d. Let me make myself clear; it should apply to Service pay only, leaving income from investments or other sources to bear the full rate of 7s. 6d. In these days the Chancellor can hardly say that he cannot afford concessions. The days of balanced Budgets have gone. There is no magic in the figure of 1,234,000,000, even if it be the right hon. Gentleman's telephone number. It is a concession which would give great encouragement to His Majesty's Forces, and if the revenue must be made up, I would endorse the suggestion which almost fell from the lips of the right hon. Gentleman the Member for Sparkbrook when he was telling us this afternoon what happens in France. I believe that those of military age in sheltered and reserved occupations would recognise the justice of a Surtax to be levied upon them because of their good fortune in remaining in that capacity. Of course, there would have to be exemptions for those who may have endeavoured to enlist, but who were rejected on medical grounds; others who were on waiting lists would qualify for the reduction as and when they were called up.
When I receive circulars—and, like other hon. Members, I get a good many—asking for increased cost-of-living bonuses for civil servants and other people in reserved and sheltered occupations, I invariably reply that if and when the Government can spend more upon salaries or bonuses the first to receive them should be the rank and file of His Majesty's Forces. When I see the work


done by men on such duties as convoy patrol, and compare the remuneration they get with the remuneration to be obtained in civilian life, I do not think I am asking for anything which is not just. I would appeal to the Chancellor not to flog those willing horses. Many of them are serving voluntarily, for the second time in their lives. Of course, the country will receive the same loyalty and sacrifice from these men whatever their financial treatment from the Government. They may not lobby or demonstrate—in any case, they are not of that kidney—but I suggest that that very fact lays an obligation on my right hon. Friend the Chancellor and on all Members of this Committee.

7.22 p.m.

Mr. Woodburn: I am sure we have all listened with interest to the hon. Member for Holderness (Mr. Braithwaite), but I think some of us regret the tone of his remarks, which, it seems to me, would tend to unite the enemy and to divide the people at home. This country has, very wisely, refrained from using a tone of menace towards the people on the other side of the battlefield. This country certainly never set out on this gigantic enterprise with any intention of wreaking vengeance upon the German people. The fantastic idea of this country assuming the tremendous task of garrisoning Germany after the war and holding down 80,000,000 people against their will, is deplorable.

Mr. Braithwaite: Might I ask the hon. Member—because this is a matter which might interest his constituents—whether he regards the complete defeat of the enemy in war as an act of vengeance; or does he wish the war to cease now, with an inconclusive peace?

Mr. Woodburn: We are in this struggle to prevent war, and to defeat the war-maker. We must prevent Hitler being successful. But our success will depend on the kind of Europe which emerges when the struggle is over. If the kind of Europe that emerges is that suggested by the hon. Gentleman, it seems to me that the war will have been fought in vain. We are discussing to-night, however, the problem with which the Chancellor is faced, of co-ordinating the

resources of the country in such a way as to make it possible for us to carry the struggle through to success. The task before us, as he has shown, is that of paying, next year, taxes to the extent of £1,234,000,000, which leaves a balance, not to be found from taxation, of £1,453,000,000. My right hon. Friend who spoke earlier evidently forgot entirely that a large part of that £1,453,000,000 is to be raised by transferring from the civil population to the Government, spending power in the form of loans. That £1,453,000,000 includes all the National Savings Certificates and Defence Bonds and all the reserves of industry which the Chancellor hopes to secure for the Government in the form of investment.
A very considerable part of that has to be deducted when we come to the question of what is to be borrowed. Let us take £1,000,000,000 as a round sum. Not all of that £1,000,000,000 will be inflation. It all depends on how much of that sum is used to bring into activity men and women who are at present unemployed. To the extent that it is used to bring into productive activity people who are now unemployed, it represents no inflation at all. It is a great mistake to assume that the mere creation of credit is inflation. The whole capitalist system has been built up, for the last 100 years, by the banks creating facilities for the expansion of industry. All that is happening to-day is that, instead of this being done for private enterprise, the Government are doing it for public enterprise. From that £1,453,000,000 there must also be deducted the foreign imports which we pay for with gold or by the sale of securities abroad. After all, that is using up past exports and drawing upon what we created in the past.
We expect, of course, that, as a result of the Government's attempts, a great sum of money will be lent to the Government, but there is another source of income for the Government which might not arise from that at all. To the extent that people are persuaded to abstain from spending, even if the money is not lent to the Government, they create a gap which may be filled without inflation. That is the purpose, I take it, of the Government's decision to prevent companies paying more than a limited dividend. It means that money that would


otherwise be paid out and become purchasing power goes into reserves. If the companies cannot spend it, because of the restrictions on the possibility of spending it—machine tools are licensed and materials controlled, and it is almost impossible for a company to spend money unless the Government are prepared to allow them to get materials—a large sum of money will be available from loan or from abstention from spending.
I am glad that the Chancellor has come in because the question of the issue of bonus shares, to which I am about to refer, is a part of this proposal to limit the use of reserves in the way of spending power. It is true that bonus shares were used in the last war, not to issue money which would not otherwise be used, but to cover up very high dividends. Actually, the only purpose of issuing bonus snares is to cover up the size of the dividend. It does not make any difference to the strength of the company. Let me give a simple instance. If I have a company with £100 in capital, and, in the course of some years, I am able to build up reserves amounting to another £100, that is shown in my balance sheet as £100 capital and £100 reserves. My £1 share will be worth £2 in the market. If I want to realise 50 of these shares, I can sell them for £100. The company; in its wisdom, might not wish to show that it is paying such a dividend, and it might, therefore, make an arrangement by which it transfers the £100 reserves into share capital. It now calls its capital £200, with no reserves, and gives out shares to the extent of another £100. Instead of owning 100 shares worth £2 each, it now owns 200 shares worth £1 each. But the value of my holding in that company is not altered in the slightest and, if I want to realise £100, I simply sell the 100 bonus shares instead of selling 50 £2 shares, and I get the £100 in the same way.
Therefore, the only advantage which will arise from the Government's proposal to stop the issue of bonus shares, is to make quite clear the profits which are being distributed in dividends but, as the Chancellor is to control the dividends as well, the question of controlling bonus shares has no effect at all. It does not prevent the dodging of Super-tax payment by allowing money to be put to reserve and later realised by the sale of

capital assets. If I sell my 50 shares for £2 each, I have £50 extra profit which is not liable to Super-tax. The Chancellor ought to look into the question. In his proposal to limit dividends, he is actually sacrificing a good deal of Super-tax because, if the high dividends were paid, he would collect Super-tax on them. If he does not allow them to be paid, they will spread the even dividends over many years and he will collect only the ordinary Income Tax on them.
One great suggestion that the Chancellor himself made is the reduction of waste. I suggest that he should look into some of the Government Departments which have been created. I instance the Ministry of Food. In the Inverness district, a livestock control has been set up and the man in charge gets £3,800 a year. Previous to that he was earning £500. I am informed that he is quite a capable man at his business and there is no reflection on him at all. I am told he employs a chartered accountant at £800 and four clerks at £2 10s. a week each to do the work. He is still the acting-manager of his own firm. I calculate that he must be clearing £2,000 a year—not that he ever asked for it, but evidently that is the standard rate of wage for that kind of job all over the country. I wonder how much more of that there is because it is very difficult for the Chancellor to appeal to people in that region to make sacrifices if they find what seems to them flagrant waste, at their own door. The head of that man's firm gets £700 for some other job in the livestock control. All over the place there has been the setting up of these controls, bringing people into jobs at what seem to be extravagant salaries. I think the Chancellor ought to conduct a strict investigation, because a considerable saving might be made in that direction. I am sure the same man would be prepared to do the work at much less and without any extravagant increase in his standard of life. That is in a small district where everyone knows everyone else and you cannot disguise these things. In a big town it might not be noticed. In the Highlands of Scotland, where people are careful with their money, they object to the Chancellor being careless, as they think, with the public money.
I should like to make one or two suggestions because, although many Mem-


bers have said we are not introducing nearly enough taxation, to many people I think it will be a very big wrench to part with what will be demanded from them in the coming year. Both for his own sake and from the point of view of the taxpayer's convenience, I suggest that the Chancellor should not wait until the end of the year before he collects his Income Tax. People are not all thrifty. They are not all members of co-operative societies accumulating dividends with which to pay their rent or taxes and, when the end of the year comes, some have spent the money which is supposed to be for the Chancellor. I suggest that he should pursue with the public, the very wise method which he pursues with Members of Parliament and civil servants and either arrange to deduct tax once a quarter or collect it monthly, or by instalments. The lump sum payment is a dreadful blow to people when they have forgotten all about the Income Tax. Even the workers would be better pleased if there was some arrangement by which the tax could be collected weekly or monthly rather than by a lump sum at the end of the year. It would have another advantage. The Chancellor is inviting people to lend money to the Government. If he arranges that and allows them 1 per cent. per quarter during the next nine months, he will get a loan at 3 per cent. or less, because he will get the money in this year instead of waiting six or nine months. I think Lord Snowden once indulged in the experiment of collecting the whole tax in January instead of in two instalments, and so brought it into the previous year in order to balance his Budget. In any case it is anticipating income and the suggestion is for the convenience of the taxpayer and also of the tax gatherer. It is a great advantage if a tax can be made simple, easy of collection and easy of payment.
I come to the real question raised in regard to bonus shares. That is the question of companies building up secret reserves at the expense of the Government during the war. I speak from memory, but during the last war I believe a very important coal company was working under Government control. At the end of the Government control it issued bonus shares to the extent of £250,000. The Chancellor would have been surprised to see the balance sheet, because it showed

exactly the same amount of reserves after the company issued the bonus shares as it had before. I looked with interest to see where they came from, and they came from the fact that the company had revalued their plant and machinery and were thus able to increase their capital. At the Government's expense they had been putting in coal conveyors and coal-cutting machinery and stocking the colliery. They simply revalued all the machinery and brought it out and called it capital. That is the real point in regard to bonus shares, and the decision of the Government will not interfere with that in the slightest. It is a thing that will have to be watched carefully, otherwise the Chancellor may lose a very great deal indeed.
The right hon. and gallant Member for Rye (Sir G. Courthope) told us last night very ingenuously that the railway companies had been practising this for some time. They have been building new carriages and new wagons and laying new rails, all out of revenue. Instead of railway capital being watered, it is now worth far more than the nominal capital. In other words, for a great many years, if the right hon. and gallant Gentleman's statement is correct, the companies have been evading payment of Income Tax by building up their capital from revenue which should have gone through profits into reserve and should have been charged to capital account. The Income Tax inspectors have the duty of seeing that nothing is charged to revenue which ought to be charged to capital. While, from the point of view of the railways as a national asset, we are all pleased to hear that they are being kept up to a point of efficiency, from the point of view of the Chancellor of the Exchequer it means that there has been a serious leakage regarding the payment of Income Tax on profits as undistributed dividend. Therefore I would suggest, as has been suggested already from these benches, that this evasion of tax and Super-tax must be carefully looked into by the Chancellor of the Exchequer.
I was very interested in the proposal which the Chancellor made—one with which I am in hearty concurrence—that at the end of the war there should not be people who had accumulated great fortunes out of the war, but I was unable to see how he could decide on that with-


out two valuations. I would like him, when he comes to discuss this matter, to be good enough to say whether that includes land. There was an increase in wealth of £5,065,000,000 as a result of the last war. A large number of people, taken together, had accumulated £5,065,000,000 more than they had when the war started. Speaking from memory as to the total figures, I believe that the wealth of landowners had increased to the extent of £1,000,000,000. I do not know how the Chancellor is to estimate that without a valuation of the land now and a valuation later, if it can be done by Income Tax schedules or something of that nature, but I should be interested to hear, because that seems to be a very sensible way to deal with the subject. There is another point which he might keep in mind. When I started fighting elections there was the question of the old increment tax, and it might be possible in a future Budget to consider some kind of increment tax which would prevent people gaining from community services. That would cover the idea of my hon. Friends that nobody should gain from the value of land which had been increased by the community method. It would also bring to the public the real advantage of public effort.
The speech of the Chancellor of the Exchequer yesterday seemed to be a model of exposition, but I am sure that the right hon. Gentleman is accustomed to being paid compliments on such occasions. I would not say that the taxation is not severe enough. He may be over cautious. I think he has made provision that will actually cover the effort, but that can only be a matter of conjecture, and no doubt he could obtain more, if more were required. But in spreading the burden over the people, steps should be taken to make it easier for them to pay, and I am sure that nobody in this country will grudge making the sacrifice, if, in the end, that sacrifice brings about the triumph of the principles for which we stand.

7.44 p.m.

Mr. Loftus: The hon. Member for Stirling and Clackmannan, Eastern (Mr. Woodburn) worked out clearly the bonus share issue with mathematical accuracy, and if human beings always looked at things with cold mathematical minds what he indicated is what

would actually happen. Theoretically it would lower the value of the ordinary shares by 50 per cent. to issue an equal number of bonus ordinary shares, but actually that is not what happens. Generally, in a few months, in many companies, the new bonus shares are as high, or nearly as high, as the original issue was a month or two before the issue of bonus shares. That is how it works out in fact and not in theory. I suggest to the Chancellor of the Exchequer that in outlining this gigantic tapestry for us and for the nation and then filling in the details, there was one part of the tapestry that he did not quite fill in, leaving us with only the outline. I refer to the sales tax.
As I listened, I felt, as I think the whole Committee felt, that it was a gigantic, severe and decidedly drastic Budget, but on reflection I think that opinions have changed, and I wonder now whether it is severe enough. I certainly sympathise with and support very strongly the remarks made yesterday by the right hon. Gentleman the Leader of the Liberal Opposition and those made to-day by the hon. Member for East Birkenhead (Mr. White) and by my right hon. Friend the. Member for Sparkbrook (Mr. Amery)—that, compared with the sacrifices made by the French, even the sacrifices caused by this Budget do not bring our effort up to the same level as the French. I do not know whether hon. Members realise how much the French are doing. On an income of £200, before this Budget, taxation in this country was 6 per cent. and in France 19 per cent.; on an income of £600, in this country it was 19 per cent. and in France 28 per cent.; and on an income of £5,000 a year it was 41 per cent. in this country and in France 68 per cent. But that does not represent it all. France is spending on her effort this year very nearly as much as we are spending. Then there are the privations, the things which the French people do without. There is the French soldier with his 1d. a day and the British soldier with his 2s. a day. When I contemplate the gallant self-sacrifice borne by the whole French nation, I feel that anyone in this country who grumbles about this Budget being severe, should really be ashamed to do so. I feel with those in this country of all parties who have been looking at the reality of the


situation, that it is quite possible, as some speakers have already said, that in six months' time we must face yet another Budget, as we did last year. I do not propose to criticise the taxation, and I would like to thank my right hon. Friend the Chancellor of the Exchequer for the concession made to the merchant seamen and fishermen. It is a small thing, easily overlooked in these gigantic figures, but it means much to poor men, and I thank him most heartily for it.
In the case of the sales tax we must wait and see. The right hon. Gentleman the Member for East Edinburgh (Mr. Pethick-Lawrence) suggested that it should be confined to luxury goods and asked whether cloth, pots and pans and so on would be taxed, but the whole point of the taxation which we have to impose to-day, is that we must restrict consumption on many desirable kinds of goods. Take the case of wool. We import less wool to-day than we did before the war. The Navy, Army and Air Force require gigantic quantities, and that takes the wool away from the civilian market. Wool is also one of our chief exports. We have to export more than we did in peace time, therefore the residue which is left to the civilian population must be diminished by an immense amount.

Mr. Pethick-Lawrence: I am sure that the hon. Gentleman does not want to misrepresent what I said. I did not say that the tax ought to be confined to luxuries. I said that it ought to be graded, if possible, so that luxuries would pay a higher rate of tax than other articles which are not luxuries, and I asked whether pots and pans were to be included? I wanted to know because it seemed to me that the Chancellor of the Exchequer was on the horns of a dilemma.

Mr. Loftus: The last thing I intended to do was to misrepresent the right hon. Gentleman, but I can see that pots and pans may be heavily taxed if we require tin and iron. The only criticism I have to make of the sales tax is this: that to produce adequate revenue we have to tax extremely highly, something in the nature of 30 per cent. I think it was the hon. Member for East Birkenhead who said that a tax of 5 or 10 per cent.

would bring in only a comparatively small sum. There is one thing which I regret about this Budget. When we are imposing necessary privations in war time on the whole population, we should take care to see that the children do not suffer hardship. I realise my right hon. Friend could not possibly carry out the whole plan of Mr. Keynes of 5s. for each child, which would cost about £100,000,000. But I would have liked him to have given family allowances to every family where there are more than three children under 15 or, if possible, where there are more than two children under that age. I think the cost would have been small—between £10,000,000 and £15,000,000. If more restrictions on consumption have to be imposed, I hope we will all agree that allowances should be given to children, beyond a certain number, under the age of 15.
The Chancellor has to deal in this Budget with the question of how to pay for our gigantic increase of imports. That is, alone, an immense and difficult task. We have to restrict imports of all kinds that are not essential for our war efforts and I regret that the efforts made two or three years ago by one or two Members of this House, to encourage the use of gas-producer vehicles, did not then meet with greater success, so as to limit our import of petrol to-day. We have, of course, to increase exports in order to pay for our increased imports. Then there is the export of our gold, but there is a limit to the gold absorptive capacity of the world. The only country absorbing gold is the U.S.A. and we must not attempt to overfeed them or they might get indigestion and refuse the diet.
Another method of paying for imports is by the export of securities. I understand that we are confining the requisitioning of securities to American dollar securities. I am a little nervous as to our control of the dollar sterling exchange. I put two or three Questions to my-right hon. Friend a week or two ago, to which he gave long explanatory answers, but these did not quite satisfy me. The position as I see it is this: We requisition dollar securities owned by British nationals, but we allow a free market in London for international sterling securities. My right hon. Friend, in answer to one of my Questions, said it would be a mistake to restrict the free


flow of foreign money to London which means, of course, that it is also a mistake to restrict the outflow.
I am assured that this actually happened. When the Treasury requisitioned the first lot of dollar securities they paid in sterling. Most of the holders were big institutions and companies which, with the millions of sterling paid them by the Treasury, had to find large blocks of sterling investments. The only investments available in large blocks in sterling are these international securities—gold, oil and so on. I am told that in one week, shortly after the Treasury requisitioned the first dollar securities, British investors bought, on the London Stock Exchange, £600,000 worth of British-American tobacco shares from American holders and that the Americans transferred on the unofficial exchange that amount into dollars. If that information is correct, we get this extraordinary position—that the Treasury requisitions dollar securities and pays holders in sterling; the holders buy sterling securities from Americans, using the Treasury sterling and the Americans take that sterling and put it back into dollars. If that occurs to any extent it nullifies to some extent the requisitioning of dollar securities.
There is another point as regards the sale of our foreign assets. We are confined, so far, to U.S.A. dollar securities, but we own vast sterling investments in the Dominions. We have in Australia to-day, I suppose, approximately £1,000,000,000; in New Zealand, I imagine, nearly £200,000,000 and in Canada, though it is hard to say, about £400,000,000 or, perhaps, £500,000,000. I confess that I am rather in opposition to general financial opinions in this matter which regard the sale, the decrease of any of these holdings, as something to be avoided at all costs. I would like to see the Dominions become so prosperous that they could pay for large quantities of these invested funds by sending us goods during war time and taking in exchange some of the bonds representing money that was lent them. I believe if a nation like New Zealand could get out of debt by supplying us with goods we would get a much healthier state of inter-Imperial trade. Their goods would come to us in genuine trade and all goods sent by the Dominions would demand corresponding exports of our manufactured goods to pay

for them. There would be no necessity for the Dominions to do, as they are forced to do to-day—keep up a high tariff barrier in order to get a large favourable balance of trade. I suggest that if the necessity arises we can get very considerable imports from our Dominions in exchange for selling them a proportion of the securities we hold.
The second task facing the Chancellor of the Exchequer is this. Can we take from national consumption enough national savings and enough taxes to pay for the cost of the war without inflation? That is an immense problem. The position as I see it is this. The hon. Member for Wrexham (Mr. Richards) in a most interesting speech gave the national income as £5,300,000,000. He pointed out that national expenditure was exactly half, and that the only way of lightening the burden was to increase national production. I quite agree. It is a great surprise that we still have such a large number of unemployed. Everyone will agree that after eight months of war we should have reached a stage at which almost everybody was fully employed. We have to speed up employment because it is the only way to raise the national income and decrease the percentage which we have to take away from the national income by war expenditure.
Let me put it in this way. If we increase national production by 10 per cent. and decrease national consumption by 10 per cent. we have £1,000,000,000 extra. It may be asked: How can we decrease national consumption to such a large extent? I think we shall have to do so. It would leave national consumption at a considerably higher level than it was in 1931. I notice that last year on the Vote of Credit we did not spend £91,000,000. I listened with great interest to the Chancellor of the Exchequer's speech explaining that that did not of necessity mean a lack in providing armaments and equipment for our Forces. I must confess that he did not quite remove from my mind the impression left by the many rumours I have heard about the Treasury being the dead-hand, slackening rearmament and holding it up, and in spite of the Chancellor of the Exquer's information, that suspicion still lingers in my mind. Of course, the Treasury has to guard the financial sys-


tem which is part of our war effort; that is its duty. It is foolish to accumulate great wealth in the city and neglect to keep the walls of the city in repair; that simply invites the barbarians to attack and loot the city. That I think has been to some extent the attitude of the Treasury.
The crux of the Budget is: Can we make up this gap of £1,400,000,000 without inflation? It will be at least £1,400,000,000 and may be a great deal more. How can we fill the gap? The Chancellor of the Exchequer has £100,000,000 balance due from the loan of last year. That leaves a balance of £1,300,000,000. He relies on the export of gold and the sale of securities for another £300,000,000. That leaves a balance of £1,000,000,000. The whole point, the vital and central point, is: Can we raise £1,000,000,000 by genuine loans out of genuine savings? Our national savings average about £500,000,000 to £600,000,000 a year. Can we suddenly increase these savings up to £1,000,000,000? I doubt it; and if we cannot do it there must be some degree of inflation. That is what we have to face. I feel that Mr. Keynes has done a national service of immense importance, whether we agree with his proposals or not, in making the nation face the full realities of the situation, face the fact that consumption has to be reduced, that savings have to be immensely increased, and that we have to make severe sacrifices to avoid inflation.
I notice that his plan has been turned down by the Chancellor of the Exchequer, the Labour party, by the Liberal Opposition and by the Trades Union Congress. The plan was new, strange and alien to our habits. We are a conservative nation, and it probably would involve immense administrative difficulties. The Chancellor of the Exchequer's criticism of the plan yesterday was extraordinarily effective, but although we reject Mr. Keynes' plan he has made us face the realities of the situation. Although we may reject his plan we have to tackle the realities he placed before us and tackle them by other means if we reject his plan.
I propose now to venture on a rather dangerous subject. We want to avoid inflation and we shall all do our best to

avoid it. But suppose some degree of inflation has to come? In that case I make one plea, that it should be as small as possible and should be strictly controlled by the Government. The right hon. and gallant Member for Newcastle-under-Lyme (Colonel Wedgwood) in his interesting speech about inflation pointed out many of the evils, but one he did not mention. Inflation is apt to kill liberty and instal tyranny. Inflation in Germany destroyed the savings of all classes and paved the way for the dictator. If we are to have any degree of inflation let it be different from what it was in the last war; do not let it leave a permanent burden of heavy interest on the nation. The procedure in the last war was rather baldly stated by the hon. Member for Wrexham. The technique of the banks' advances and methods may require many qualifications, but, generally speaking, you can say that inflation in the last war happened as follows. The joint stock banks advanced money to their customers who used that money to subscribe to Government loans, and the Government used those credits to pay for goods and to pay the workers. This in turn created additional deposits in the joint stock banks which in turn provided an additional basis for the creation of new loans to customers to be used to subscribe for new Government loans. The inflation in the last war was not merely the printing of currency; that was a consequence and not a cause of inflation. The cause was the creation of immense sums of bank credit. I think we are all agreed that that sort of thing must not in any circumstances happen again.
The "Economist" of 26th January last contained a most interesting article entitled "The Technique of Inflation," in which it pointed out that if inflation has to come, it must be strictly controlled; and it suggested a new technique, which was that—expressing it very broadly and bluntly—the Government should borrow directly from the joint stock banks and pay a mere book-keeping interest of one-half of 1 per cent. When I read that article in the "Economist," I realised the truth of the remark recently made by Mr. Keynes when he said that the orthodox economists kept catching up so fast that he looked forward to a blameless old age surrounded by orthodoxy. On reading that article in the "Economist," I realised that we have


moved a long way in our economic ideas since the last war. I would go even further. If there has to be a certain expansion of credit money, created credit, I cannot see why the State itself should not create that credit free of interest. I do not mean the printing of currency notes, but the creation of credit in the same way as the joint stock banks do when they lend to customers. That credit, so created, should carry no interest, but be redeemable by annual instalments. Such a system would involve very strict control. It must not involve any juggling by political control. But it would have the effect that any assets created by that Government credit would not bear the burden of interest. In such things as housing schemes, and so on, the burden of interest probably accounts for a considerable proportion of the rent. I feel that it is a flaw in the wonderful and very efficient money system of the modern world that nearly all money comes into being as a loan saddled with interest. If we could get a new technique, very carefully controlled, for the State to expand credit, it would be a good thing, provided one could guard against any evils of real inflation.
It must always be remembered, however, that no methods of currency control will allow us to dodge realities, that money is only a symbol representing goods, and that the realities are goods. Therefore, any juggling with money brings its own punishment. I believe this direct control of credit by the Government may become necessary in war. Certainly, I believe it will be essential in post-war reconstruction. I do not believe that the world can go on piling up vast quantities of debts. The world is overburdened with debt to-day. We are warned that civilisation may be destroyed by war, but it may also be destroyed by an over-heavy burden of debt. It was an over-heavy burden of debt and taxation, Ear more than the barbarians, which destroyed the Roman Empire. I fancy at times that something may be said for the old Mosaic law by which all debts were abolished once in every 50 or 100 years. There is one thing that I must say to hon. Members opposite. I must make quite clear that I do not advocate under any consideration the nationalisation of the joint stock banks. These great institutions are conducted with an in-

tegrity and an ability which make them the admiration of the world and a model of how banking institutions should be conducted. They work their present system in an extremely efficient manner. I do not criticise them, but I criticise the system by which the bulk of our money must come burdened with interest. I feel that the banking system should act as agents for and not as the creators of Government credit.
Everyone in the Committee recognises the immense burden which the Chancellor of the Exchequer carries, and carries with such apparent ease. We would all like to assist him. Again, I appeal to him to consider whether it might not be a good thing to lighten that burden by constituting a subordinate economic Cabinet, meeting once a week, from which he could get advice and help; and I ask him also whether he might not strengthen that Advisory Committee presided over by Lord Stamp by adding to it one or two slightly unorthodox economists like Mr. Keynes and Professor Harrod. We all recognise how gallantly the Chancellor has carried this burden. We appreciated that yesterday. Some of us feel that he will have to face a similar effort in the months that lie before us, but, one and all, we wish him every success, and hope that his methods will succeed, that the gap of £1,000,000,000 will be bridged by the voluntary, genuine savings of the people, thus avoiding the miseries of inflation.

8.20 p.m.

Mr. McGovern: I rise for a short period during the course of this Debate to strike what I regard as an entirely distinct note. I have every sympathy with those who are in charge of the finance of the country in their efforts to get sufficient amounts of money to carry on the war, and in their task of searching the pockets of the people of this country to obtain the necessary amount, by taxation and by loan, to carry on this destruction into which the world has entered. I have heard various suggestions as to how the money should be raised, and every person is prepared to see that the other fellow bears the sacrifice of carrying on the war, and that he should be exempt, or at least that he should make the minimum sacrifice. It reminds me of the letters I receive, almost every day, from people who are called-up,


saying that they want to get into non-combatant battalions. Everyone wants to get into the Artillery or the R.A.M.C; they all want to carry the dead or the wounded, but no one wants to engage in the deadly struggle of war.
That brings me to a reflection on why this money is being gathered together. My mind goes back to the year 1930, and I think of the hue and cry raised over the paltry sum—paltry in relation to the sum to-day—of £100,000,000 raised for the unemployed of this country over 20 years. It was going to bring destruction to this country and end our financial system. The late Labour Prime Minister was put on the films to show that inflation in Germany had led to the ruin of the whole economic order in that country, and that the same was waiting for us if we dared to pay to the unemployed a miserable 24s. a week. We have gone on from that stage when the bankers' ramp took place in 1930, and we are facing to-day, not the raising of £100,000,000 to save human life, but the raising of thousands of millions of pounds to engage in an orgy of destruction in blood which has been let loose throughout the world. In this struggle we are told that the cause is this man Hitler. There used to be an advertisement in a paper in Glasgow before the war which was known to many. It was of a busy painter who was prepared to go to any corner of the West of Scotland for a given sum to paper, paint and whitewash. We have seen the busiest painter I have ever known in my 30 years' experience in the building trade, and if he had stuck to his job of painting, it would not have been so bad, but he has begun to paint the map of the world in a different colour, and in the process he has found himself in conflict with other peoples throughout the world.
To-day we are only on the fringe of this situation. If man applies the brains God has given him, and examines the situation, he is bound to see, as I stated here on the Sunday when war broke out, that the end of this struggle can be foreseen by no man, and no man can tell the magnitude of the task. Everyone is suggesting ways and means of raising money to carry on that struggle, but I am tempted to ask what is the meaning of this struggle, and why there is no voice in this House turning our minds along the road of peace

instead of along the road of war. Has mankind got so captivated by this entrancing struggle of death and destruction that it must be driven along this road, and there is no way out of the catastrophe awaiting it? If you carry on this war with the slogan of preserving freedom, you will end all freedom for civilisation, and spend in the process tremendous sums of money which would break the heart of any man who sees the task awaiting solution in a peaceful way.
What is wanted in this country is a leader of intelligence and courage, who is prepared to say that he intends to use superhuman efforts to fight this catastrophe. When I hear Members of the Opposition one after the other joining in this chorus and demanding to raise money, I wonder why the workers ever put a party in to engage in this deadly struggle. Here we have tried to silence every kind of opposition in the country. We have engaged in a conspiracy to prevent electors from voicing their opinions on taxation or on any other issue. We say that we are the elected persons. We are the members of the British Reichstag, and we shall refuse to allow the electors to have any elections. Without consulting the rank and file and without asking them to agree, we say we shall suspend elections for the period of the war, and that the electors will have no expression, opinion or voice on whether this war shall continue or stop, or on the terms on which the war shall be ended. This is a conspiracy against a man who has held power in Germany since 1933 because of his misdeeds. We have held power from 1935, which is just two years short of that, and we have decided that we are going to continue for years to come if it is necessary to carry out what we claim to be the defeat of Hitler or Hitlerism.

Miss Rathbone: The hon. Member is, I believe, a "stop the war" man. When the votes at recent by-elections in favour of a "stop the war" candidate have varied from 2 per cent. to 4 per cent., does the hon. Member think he would be returned if there was an election?

Mr. McGovern: So far as I am concerned, that is not the argument at all. The argument is not whether the people in their lunacy—

The Temporary Chairman (Mr. Charles Williams): I think we must keep strictly to the terms of the Budget and not discuss either the question which was just put, or follow up the hon. Member's remarks with regard to elections.

Mr. McGovern: With all respect, I was only saying that in connection with the struggle for democracy for which we are raising these vast sums, there has been a suspension of the voice of the people. Therefore, I am analysing whether it is really a struggle for democracy when the voice of democracy is not allowed to be heard in relation to the Budget and to other issues in the Parliamentary arena. Whether the Budget would or would not be endorsed at an election does not matter; what matters is that the people have a right to be consulted on these issues, and they are not being consulted. I raise my voice to say what I believe to be the right course, and even though it may be popular to-day to join the crazy gang which is backing the war, I take the view that sanity in the end will return. Mankind will be poorer for this struggle in every way—in life, in wealth and in happiness. Therefore, I say the money is being used and directed to wrong purposes.
We all know that in war money is raised, it is spent, and it is squandered. I am not worried so much about waste taking place here or there or about saving money in certain directions like A.R.P., because to me the whole of the money spent on war is wasted. It is a form of destruction of the national wealth that should not take place in any decent society. The popular thing to-day is to raise money to destroy Hitlerism. One hon. Member suggested a thing that shocked me. He said that in the struggle for which we are raising this money we must see that on this occasion we go right into the capital of Germany, into a dismembered Germany, and that we must be prepared to rule that country. If that sort of thing were said in Germany, if they said they must be prepared to go into the heart of London, break up the British Empire and rule it, it would stiffen the tremendous resistance of the people of this country. Therefore, when such an expression of view is made in this Committee it shows that behind the minds of a section of people there is the desire not only, as they say, to protect freedom, but once more to place the

German people under the heal of the financiers and the capitalists of France and Britain.
I would urge that in this struggle the Prime Minister and his advisers outside the House and inside the Cabinet should examine the road we are travelling at the moment, particularly in regard to the raising of these vast sums of money. When the Chancellor talks about how we are to raise the money, it must be borne in mind that it is all raised from the efforts of the common people. As the producers of the wealth of the country they find the whole of this taxation. Not only is it taken out of them in taxes and in increased prices owing to the sales tax, it also comes out of the unpaid wages that go into the hands of the bond-holding classes. It is all plunder which comes from the efforts of the common people to create wealth, and the whole of society lives on the efforts of that section of the people. One hon. Member suggested that special consideration should be given to the serving man. I am not in favour of the war, because it is a brutal struggle in which no civilised community should take part. Nothing has been said for this war that was not said for the last war. No new trick and no new slogan have come into the arena to-day. When there is talk about sacrifice, I realise that the men at the bottom are bound to bear the greatest sacrifice, both in peace and in war.
Let us examine the cases of two serving men as we are told that they should be given special consideration. A man with a £5 a week job or a man with a £10 a week salary is called to service and surrenders the whole of his income for the pittance of 2s. a day, his keep, and allowances, if he has any family. Another man comes from the landlord class. He has £10,000 a year out of land. These two individuals go into the Army, and one gives up his income to accept 2s. and the other retains his income out of land and receives the nominal 2s. These sacrifices are cropping up every day. A Cabinet Minister gets £100 a week, the Prime Minister gets £200 a week, the Monarchy gets £10,000 a week, and the serving soldier gets 2s. a day.
Where is the spirit of sacrifice? A man with a wife and six children draws an artisan's wage of £3 12s., and a man who has a wife and no children also


draws £3 12s. Where is the sacrifice? Where is the sacrifice from different sections when there is unequal taxation which is not thought out or intelligent, but is designed so that it can be evaded by large sections of the country? I do not smoke or drink, and the State does not get me in that taxation. It will get me probably, as it will get many Members of the Committee, in stamps to our constituents, and we shall get a hard kick in the pants there. My correspondence has gone up from 80 to 300 letters a week during the war. Any Member who has no other income than his Parliamentary salary will be hit. If there were any real spirit of sacrifice, we would have a subsistence basis for men, women and children, and we would begin to tax after that basis has been met. We would probably increase taxation in war-time and say that we would confiscate all over £5,000 a year. Do not tell me that the Marquess of Bute and the man on the means test have an equal stake in the country, because no intelligent individual would accept it. If the son of the Marquess of Bute and the man on the means test have to go and serve, then if the menace is a real one, the Marquess of Bute is the man who has to fear most.
If we had intelligent statesmanship, we would not be considering preparations for a two or three years' war, because if we are out to defeat the armed forces of Germany, we are engaged on a struggle which will take a very long time. All the prophecies of internal revolt and shortage of materials have gone by the board. We are engaged in a deadly struggle. What is wanted is not repression and military victory, but a form of justice in the world. We want statesmanship that is prepared to demand now a cessation of this struggle and to promise immediately an international conference of the Powers to ration out the resources of the world as Nature intended them to be, not for the benefit of a group of nations or a few individuals, but for the whole of mankind, remembering that the Germans as well as the French and the British have a right to consideration in the feeding of their industries with raw materials. We want that in preference to the selfish policy of robbing everybody in the State in order to defend the interests of the few, under the guise of

freedom and democracy, when we all know that we are collecting money for the selfish, sordid, materialist interests of a few gangsters in this country and France who are menaced by the gangsters of Germany. If we are to do justice to all mankind, let us proclaim to the world fearlessly that every human being will be given consideration, and that we will enter into a struggle not to destroy mankind but to see if we cannot raise the standards of life of the black, yellow and white races and end this world struggle, which will end up probably in civil war, social revolution and blood lust entering in with its class antagonisms and love of war. In that state of anarchy I can see this country marching blindfold into that struggle. I hope the best elements in the country will make their voices heard as early as possible to stop this stupendous fraud on the public, and to end the war and the collection of this money for the purpose of death and destruction.

8.42 p.m.

Sir Herbert Williams: We have listened with great interest, as we always do, to the eloquence of the hon. Member for Shettleston (Mr. McGovern), but, of course, the speech is one which we have heard before. It is one of those fortunate speeches that can be delivered on nearly every occasion when the terms of reference are wide enough. But it did not mean anything. If we were to propose to Hitler that there should be an international conference to-morrow, I do not think he would come.

Mr. McGovern: Why not try?

Sir H. Williams: We did try once. And if he did come we could not believe that anything he signed would be true. Therefore, the suggestion has no bearing on things. It is eloquence, but it does not mean anything at all. I always like listening to the hon. Member, because he says things so well. I wish I could say them as well. I wish I could talk nothing with such enthusiasm.

Mr. McGovern: I have heard you for about 10 years.

Sir H. Williams: Other business has to be taken to-night, and therefore I must be briefer than I wished to be. The Chancellor has proposed a Budget which


is a heavy Budget and will cause a great many people many difficulties. I will not talk about sacrifices, because that is a futile word to use, but the Budget will mean to masses of people difficult adjustments in their lives. Those who have said that the Budget ought to have been bolder have not the faintest idea of what they are saying. It will take the people a long time before they can adapt themselves to the changes made in this Budget. All over the country people are sitting down together and saying, "Tobacco is up 3d.; beer is up 1d. a pint; those of us who have to pay Income Tax have to find another 6d. in the pound this year, and we all write a lot of letters." Millions of people are talking in that way, all kinds of simple, humble folk as well as the so-called well-to-do. They are trying how they can arrange their lives. The Budget does represent a heavy burden and it is nonsense to make high-falutin' speeches arguing that the Budget ought to have been bolder. There are very few people who, if they had had to compile the Budget, would have imposed heavier burdens. Later the burdens may be heavier, but we must give the economic machine time to adapt itself. The time factor is a vital thing in all economic changes.
The hon. Member for Lowestoft (Mr. Loftus) wanted the Government to borrow money without paying interest. He seemed to think it was a novel idea. It is not at all novel. A gentleman named Peppiatt undertakes to pay me £1 if I take a bank note to the Bank of England. If I do, he will give me another just like it. He has to work to the instructions of the Chancellor of the Exchequer, and the real value which somebody gave to the Bank of England for that £1 has been invested, and the Chancellor gets about £13,000,000 a year out of this inflationary device. There was once a Scotsman named Law who became financial adviser to Louis of France—I think Louis XV—nnd the net result was inflation, and the final result was that Louis XVI went to the guillotine.

Mr. McGovern: The proper place.

Sir H. Williams: It may have been, but a lot of other people went to the guillotine too and the populace looked on and knitted. I am not as enthusiastic about these things as the hon. Member for Lowestoft. I believe the greatest difficulty

the Chancellor will have over the new taxes will arise out of the increased postal charges. We shall hear about it in a few days' time, because it takes time for opinion to formulate itself. The new charges represent a heavy burden of an economic character, and we should realise the fact that there will be strong protests, not against the fact that the postal charges have been increased but against the magnitude of the increases. The postal charge will be ½d. per letter higher than in the last war, and that represents a serious burden.
There has not been as much talk as I should have liked about the necessity for spending less. Last October I said that our A.R.P. system was crazy. It is not quite as crazy now as it was then, but much of it is still crazy. The case against it was admirably put by the right hon. and gallant Member for Newcastle-under-Lyme (Colonel Wedgwood). In pre-war days I used to think that A.R.P. would be a voluntary service and would not be mobilised until it was wanted, and the deplorable spectacle of some 300,000 people being paid to be idle, demoralising themselves, horrifies me. I hope it will be brought to an end, but it has, in fact, become a great vested interest, a new form of public assistance, and the moral effect will be very bad. The black-out, too, is a very costly business. The economic losses due to the black-out are very great. Production is restricted. I do not believe there is any sound strategic reason for the black-out. All the theories about air warfare which were given to me by experts before the war have turned out to be wrong. I cannot think of a single prediction which any expert gave me which has not turned out to be wrong. The desire for the black-out comes from the same experts. If I had my way, I would turn up all the lights to-morrow, and I do not believe there would be any prejudice to the safety of the public. Its economic cost is terrible.
It is proposed to have a Purchase Tax. I make the forecast that that tax is stillborn and that it will never come into operation. It violates most of the canons of sound taxation. The citizen will be ignorant of what he is paying, the cost of administration will be heavy and the tax will be uncertain in its operation. The fact that it operates in certain other countries does not influence me. The only reason for fancy taxation in other


countries is that the populations there are, in relation to Government affairs, less honest than we are, and their public services are more corrupt. That is the real justification for a sales tax. The object is to force a contribution from those people whom it is not economically practical to tax by means of Income Tax. That is the object of all indirect taxation. It would be very much simpler to tell the Minister of Food to stop the food subsidy. The sum of £50,000,000 or £60,000,000 a year is going down the Treasury drain in selling certain foodstuffs under cost. It will be a very much quicker way to run the Ministry of Food on a non-loss basis than to achieve the same financial result by a Purchase Tax. It can be done merely by restoring the normal state of affairs.
Now, as to borrowing policy. It is rather curious to recall that it took the Treasury nearly two and a-half years during the last war before it approached the obvious method of borrowing large sums without disturbance. That method is, broadly speaking, to borrow the amount every day that you want to spend that day. That is the process of continuous borrowing. For years that principle was pressed upon successive Chancellors of the Exchequer during the Great War before they came to the policy of continuous borrowing. It was done by war bonds. This time we have done it only in respect of continuous lendings from the smaller and less well-endowed members of the community by means of savings certificates. We have not yet come to continuous lending by people who can lend the larger sums. It causes far less economic disturbance than floating a big loan when you have to collect £50,000,000 from people upon the day of application, another £50,000,000 some time in the near future, and on the final day £200,000,000 which has to go through the machinery of the banks in order that it may be payable. That is a most uneconomic way of lending money. We made the mistake last time and we have not yet learned from the experience of last time. I hope that we shall soon come to the right approach.
One of the comments made upon the Budget by the Leader of the Opposition was that he liked it because it led us a little nearer to that classless society which

he desires. I am never quite sure whether a classless society is one in which everybody wears a dress suit or one in which nobody wears a dress suit. The only example of a classless society I have ever heard of is a curious form of monarchical dictatorship in which the bulk of the inhabitants are imperfect females and where, from time to time, a small number of males is born. After the males have, on one occasion, been introduced to Her Majesty they are handed over to the Unemployment Assistance Board and shortly afterwards they are bumped off. That society is known as a bee-hive and such communities have never shown the faintest progress. They have invented nothing and they never have had even a British Broadcasting Corporation to tell them what was happening. The only other form of classless society is one which occurs occasionally in our constituencies when a notice is exhibited that the local Labour party will hold a select dance. It is no doubt one to which the hon. Member for Shettleston would not be admitted; I do not know whether because he is too good or not good enough. "Select dance" must mean something, and I am only sorry that the Leader of the Labour party is not here in person, to tell us what its relationship is to the classless society.
Time is going on, and I have yet three or four points to put quite briefly. There are about 1,200,000 people in this country at this moment who desire employment and have not got it. The Minister of Labour with the help of the "Daily Telegraph" has been telling us for months past now that this figure is not true and that it represents really only about 500,000 unemployed people. I am sorry that the Minister is not here. What he and the "Daily Telegraph" are saying is nonsense. The bulk of those people are capable of and want employment but cannot get it. I hope that Members of the Government will not talk that kind of nonsense.

Mr. George Griffiths: What do you expect from them?

Sir H. Williams: After the first eight months of the last war the number of people unemployed in relation to those in employment was about one-fifth of what it now is. Our amazing failure to get


people into work is most extraordinary. It is a deplorable situation. There is productive capacity worth some £250,000,000 a year producing nothing at this moment. I hope that Ministers will apply their minds to this problem because there has been failure to keep the economic machine working fully at a time when it ought to be working.
For every £1 you pay out in war expenditure about 6s. 8d. at a rough calculation will come back in the form of taxes of one kind or another because of the heavy burden of taxation. That leaves two-thirds to be found; where is it to come from? It is to come out of the occupations which are not warlike. The people who are not engaged in what is called national service have to produce the money to finance those who are engaged in national service. Therefore all this talk about "Do not buy it" is terrible economic nonsense. I want to encourage everybody to buy all sorts of things unit I see the whole of our people employed. To say otherwise is to state inverted economics. The Chancellor of the Exchequer makes appeals to us to help the export trade by not buying things for home consumption. I walked up Victoria Street and I saw a shop selling shirts cheaply but I did not buy one. How was I helping the export trade? The only way to help the export trade is to sell goods. If you use up more material the home trade will be restricted but you do not help the export trade by abstaining from a purchase. In what way do the 6,700 people now unemployed in Croydon, 1,200 more than a year ago help the export trade by not pursuing their normal economic lives? A lot of nonsensical economics is being talked, as much from our own side as from the other side. There seems to have been a conspiracy. [Interruption.] Yes, but you do not really hear what you are saying yourself.
There is one thing I would say in conclusion. I am one of 32 Members of this House serving on a Select Committee on War Expenditure. Because of that work we receive a good deal of information of a confidential character. It would be a gross breach of every kind of decency, of privilege almost for those engaged in that work, to use that information in Debates in this House, except when the House is discussing one of our reports.

I am concerned more particularly with the Ministry of Supply and the Office of Works, but I can say—I learned this not as a member of the Select Committee but as an ordinary Member of Parliament—that the administrative methods now being pursued in all Government Departments are a crying scandal. You cannot get a reply to any ordinary letter under a fortnight or three weeks and when you do get a letter, it has wandered through one Department after another, simply because people cannot make up their minds to take a decision. I received a letter from a Minister. Five days before I got it I learned of a decision and when the letter came I said to the Minister: "It is a funny thing that I should get your letter just now although I heard of the decision several days ago." He replied: "Yes, that is just about right. It takes five days for a letter to go up the steps of the ladder in the Department so that the Minister can sign it, announcing a decision made five days before." The thing is a joke but Ministers are complacent about it.
My right hon. and gallant Friend the Financial Secretary to the Treasury answered a Question which I put the other day addressed to the First Lord of the Treasury who as Prime Minister is the head of the whole business. He referred it to my right hon. Friend and he gave me an answer which was not in quite his best style. I asked a Supplementary Question, and my right hon. Friend turned to me and said that, as I had been a Minister, I ought to know how it worked. My reply was that I did not like it and endeavoured to make some kind of protest against the delay that takes place in Government Departments and I hope he will do the same. This is a scandal of the first magnitude which adds enormously to the cost of administration, delays decisions and irritates the public. If ever hon. Gentlemen opposite achieve their hearts' desire of turning this country into a Socialist country my certain conviction is that it will make things even worse.

Motion made, and Question, "That the Chairman do report Progress, and ask leave to sit again," put, and agreed to.—[Mr. Boulton.]

Committee report Progress; to sit again To-morrow.

DEBTS CLEARING OFFICES AND IMPORT RESTRICTIONS ACT, 1934.

CLEARING OFFICE (SPAIN) AMENDMENT ORDER, 1940.

9.0 p.m.

Mr. Shakespeare (Secretary, Overseas Trade Department): I beg to move,
That the Clearing Office (Spain) Amendment Order, 1940, dated 30th March, 1940, a copy of which was presented to this House on 2nd April, be approved.
This Order gives effect to the recent Trade and Payments Agreement negotiated between the Spanish Government and ourselves, which was signed in Madrid on 18th March of this year. The House will remember that there was a previous agreement in January, 1936, but that Agreement was suspended in December, 1936, owing to the Spanish civil war. That Agreement took the line of a clearing agreement and provided a means of payment of debts. At the time of its suspension there was awaiting transfer through the clearance some £4,500,000 worth of debts owing to the United Kingdom to traders and creditors. There was also another £2,500,000 of debts payable to the United Kingdom traders and creditors, but which had not as yet found its way into the clearing. In total at that time, speaking very broadly, there was owing to creditors in this country something like £7,000,000, and at the same time as the result of various transactions there was about £2,000,000 sterling in the Bank of England awaiting transfer to settle debts owing to Spanish creditors.
After the conclusion of the Spanish war, His Majesty's Government thought it imperative that as soon as possible the trading position between this country and Spain should be regularised. Two essential conditions form the basis of good trade relations. First, the machinery of trade clearly cannot revolve if it be clogged with unpaid debts, and, secondly, the traders in this country must be able to trade with confidence that their goods will be paid for and that machinery exists for prompt payment.

Mr. J. J. Davidson: May I ask a question?

Mr. Shakespeare: I would rather continue if the hon. Gentleman will allow me, as this is a rather complicated subject. I shall be pleased to answer any question subsequently. Let me say a

word about these conditions. I will deal with the question of outstanding debts first. Before our exporters begin again to supply the Spanish market they must be assured that past commercial debts will be settled. No one can contest the wisdom of a provision in this Agreement whereby a method has been provided for this purpose. Under the Agreement we advanced to the Spanish Government a sum which, together with the £2,000,000 standing to the credit of Spanish traders in the Bank of England, will be sufficient to enable an immediate dividend of 50 per cent. to be paid in respect of outstanding debts, and the balance to be paid in five equal instalments of 10 per cent. each, starting, we hope, in the year 1942. It is noteworthy that trade with Spain in the past has not been confined to a few large firms in the United Kingdom but has covered a very large number of small traders. Consequently under this debt repayment provision, something like 25,000 British creditors will receive payment of their commercial debts, practically all of which were contracted before the outbreak of the Spanish civil war. The settlement to meet all outstanding claims is a condition precedent to the expansion of British export trade in the Spanish market. So much for the liquidation of past debts.
Secondly, as I pointed out, this Agreement provides machinery to which traders can look with confidence for the settlement of future trade transactions. The current proceeds of Spanish exports to this country will be paid into the clearing in London, and the money in this account will be hypothecated to pay for Spanish purchases of goods from this country. Without going into elaborate details, it has been agreed that 45 per cent. of the sterling arising from Spanish exports to this country shall be hypothecated for the purchase of United Kingdom goods. Another 45 per cent. shall be utilised for the purchase of goods within the sterling area, that is, mainly within the British Empire, and the balance of 10 per cent. will be devoted to various financial payments of a revenue nature such as insurance premiums, patents and royalties. This arrangement will give the trader confidence that in so far as he exports goods to Spain there is a prospect of prompt payment.
There is a third provision closely connected with the payment provision which I must shortly explain to the House. We give a long-term credit to the Spanish Government in the form of a £2,000,000 loan which will be paid by instalments into the clearing account in London for Spanish Government requirements. The question which may naturally be asked is: Why is it necessary, if we have made a good trading agreement, to give a long-term credit of this nature? It may be argued that Spanish exports will provide the sterling needed to buy for Spain her raw material requirements. The reason for this credit, which I think will be crystal clear to anyone who has followed recent events in Spain, is that that country has only recently emerged from a bitter civil war. For three years her trade has been interrupted and in some cases has been brought to a standstill. Stocks of raw material have naturally been exhausted, and during this period there has been no possibility of any replenishment of her capital resources. Indeed, her whole economy, as was to be expected, has been severely crippled, and clearly her prime need is for raw materials to enable her industries to be re-started and her people to find employment. No doubt, in course of time she could build up her economy and satisfy her needs out of the proceeds of foreign exchange derived from her exports, but this would be a slow and laborious process. So prolonged was the internal struggle and so widespread the exhaustion of Spain that something more is required. Her urgent need, if her economy is to be restored, is for an immediate supply of the necessary raw materials such as coal and coke for her transport system and her factories, and cotton, jute, wool and tin for her industries. Only so can the wheels of her industry revolve again and her prosperity be restored. I must apologise to the House for these explanatory words, but I wish to emphasise the purely trading nature of this transaction.
If our export trade can be promoted in any country which can provide a stable market and good security to our exporters, we cannot afford to neglect it, be that country where it may. The House will, I hope, take note of, and be reassured by, the fact that the loans made to Spain for the purchase of goods and all foreign exchange arising from Spanish

exports to this country will pass through the clearing accounts, and must be spent in the purchase of goods either in this country or in other sterling areas—which are mainly the British Empire. Provision is made, of course, for the service of the loan of £2,000,000 and the loan for the payment of debts under this Agreement. Interest will be payable immediately, and will be the first charge on the sterling in the clearing account, and provision is made for the repayment of the capital, starting in 1942, within 10 years.
Let me, therefore, sum up the mutual benefit that will flow to us and Spain as a result of this Agreement. In the first place, our traders will secure settlement of their outstanding commercial debts, and will now resume their trade with Spain and, I hope, seek an expansion of that market. I need hardly remind the House that this Agreement is another example of the Government's intention to pursue a vigorous export policy. Before the civil war in Spain there was a good market for some £5,000,000 or £6,000,000 worth of British exports, including coal and coke and a large variety of miscellaneous manufactures. Spain also was a good market for the products of the British Empire in the form of raw materials. We have always had strong commercial ties with Spain, and our relations with that country have been good. British traders knew that Spanish traders had a high sense of commercial morality, and have honoured their obligations. It is only fair to record that all Spanish Administrations, including the present one, have shown a scrupulous regard for agreements made, and have a good record for the fulfilment of obligations. In a world where in recent years this characteristic has not been a universal feature, it is right that that should be said. From the most elementary considerations of British self-interest, we cannot afford to neglect any export market, and particularly one that lies so close to our shores. We need in return the products of Spain—fruit, vegetables, and minerals—which before the civil war were exported to the tune of £13,000,000 a year.
But something more than self-interest is involved in this question, and I wish to conclude with considerations of a broader nature. I speak primarily, of course, as one responsible for the Department associated with export trade, but there are many in this House who, like


myself, love Spain and admire the Spanish people for their courage, their independence, and their warmth of heart. We shall, therefore, rejoice if the life-giving streams of trade once more refresh the parched fields of Spain. So will her economic life be re-animated and her people be restored to employment, with a steadily increasing standard of life. I believe that the friendly contacts which will be made by our traders will surely and steadily improve the relations between our two countries; and, whatever may be the convictions or the prejudices in certain quarters in respect of certain events in Spain, I do not believe there is anyone who, in the present circumstances, would willingly deny to Spain, which is now emerging from the agony of civil war, the opportunity here presented of the blessings that this Trade Agreement can alone provide, and I confidently recommend the adoption of this Order to the House.

9.16 p.m.

Mr. Shinwell: The hon. Member has explained this Agreement with his customary lucidity, and I offer him my cordial congratulations. I think it might serve the convenience of hon. Members if I indicate at once the intentions of the Opposition in respect of this Agreement. After the most careful consideration, we have decided not to oppose the Order. At the same time, it would be idle to pretend that no doubts exist regarding the propriety of this Trade Agreement. These doubts arise chiefly because of the civil war in Spain and what many people in this country regard as harsh, repressive measures adopted by the Spanish Government, including the detention of several persons whose profound convictions induced them to play an active part in the recent struggle. Nevertheless, I have no desire to fan the embers of that deplorable event. I prefer to consider the proposed Agreement entirely on its merits.
The test I propose to apply is that of whether this is a sound economic proposition or not. I take note of the fact that in some respects the Agreement is a revival of the Trade and Payments Agreement which was suspended in 1936, at the outbreak of the civil struggle. It may be that, owing to the difficulty experienced by traders at home in receiving payment for exports, financial assistance

similar to the loan now under review would have been provided; but that is pure conjecture. At any rate, this appears to be a sound effort to tidy up the pre-war Agreement. But what is really important as regards this Order is the recognition that we are in a different situation to-day. For that matter, so is Spain. We are engaged in a fight for our existence. On the other hand, Spain's economy is gravely impaired. We require for war purposes large quantities of a particular raw material which is produced in Spain. We are not completely dependent on those supplies, but without them we should be at a disadvantage, while with them we are in a much more favourable position. That must be taken into our calculations in coming to a decision on this matter.
I therefore ask myself this question. Setting aside political considerations, what are the possible benefits which can accrue from this Agreement? Does Spain produce materials which we require for the successful prosecution of the war? If so, will this Agreement increase the flow of that material to this country? In this respect we can depart from the realm of speculation and deal with the facts of the situation. Prior to the rebellion we imported almost a half of our total iron ore supplies from that country. It is an iron ore of suitable content as far as our needs are concerned. But, in consequence of the dislocation of Spanish economy consequent on the struggle in the country, and for other reasons into which I need not now enter, the supplies of iron ore considerably diminished until we reached the point of receiving no supplies at all. But recently there has been a welcome change, and, without disclosing the actual figures—that might not be desirable—I can say that the supplies which have been received are a welcome addition to our existing supplies. Having regard to the somewhat difficult situation which has arisen in connection with supplies of that particular raw material from other spheres, we are naturally desirous of availing ourselves to the full of imports from Spain. That considerable improvement in supplies of raw material is welcome. Therefore, I come to this conclusion, that although it is not certain that supplies will increase and reach the level of the pre-civil war position, it is highly probable that they may, and the balance of the argument is on the side of proba-


bility. There is a further consideration. Will this agreement lead to an increase in our exports? There cannot be the slightest doubt regarding the desperate need that exists for stimulating our export trade. We are now engaged in a strenuous export drive and we are all anxious to fortify the Government's efforts in this direction.
That brings me to the present economic position in Spain. Undoubtedly the civil war has strangled the economic life of that country. There has been considerable dislocation in industry. The machinery of production has been destroyed. There is a clamant need for material which can assist Spain to restore her economic existence. Unless that is done, she cannot facilitate her own production, and consequently, in relation to those materials that we require, there may be a distinct shortage. That is, as I see it, the crux of the whole problem. Our assistance is, therefore, not entirely altruistic but can be regarded as an act of enlightened self-interest. It is not to be deplored on that ground. In short, to make Spain a better customer than she now is, we must restore her economic position. There is a further point. Unless some means are devised for debt payments, trade between the two countries is hound to be stifled. We must at some stage, if trade relations are to be resumed, create machinery for meeting liabilities. On the other hand, traders at home must have confidence that exports will be paid for. We cannot expect them to incur losses. Consequently, in spite of some apprehension, I regard the Agreement as very satisfactory from an economic standpoint.
Although that is the conclusion that I have reached, I cannot forbear from asking this question. While this may not be a suitable moment for indulging in reflections on the outcome of the struggle in Spain, would it not enormously facilitate trade relations if we could be advised of the increasing tolerance of the present Spanish regime? I wonder whether this Agreement does not provide a convenient opportunity for making representations to the Spanish Government to abandon methods which border on repression and which cause great concern in many quarters both in this House and elsewhere. Speaking for this party, we should like to feel that this Trade Agreement was accompanied by the liberation from

prison of many persons whose only crime is that they engaged in a cause in which they profoundly believed. It will be noted that I have used language of studied moderation. I make no apology for having done so, for we are all speaking under the stress of war and with due regard for national necessities. Let us have trade agreements wherever we can secure them. I am tempted to remind hon. Members of other trade agreements, some existing and some contemplated, with countries with which we have had quarrels and with which we have existing differences; yet no voice has been raised against the promotion of such agreements—I think wisely so. Therefore, let us have, I repeat, trade agreements wherever we can secure them, but let us equally have the assurance that we derive substantial advantages, not only in the material sense, but also in the moral sphere. If we can have assurances—and no doubt the right hon. Gentleman the Under-Secretary of State for Foreign Affairs can furnish such assurances—that efforts in this direction are in contemplation, it will satisfy Members of the House who are disturbed about the aftermath of the Spanish struggle.

9.31 p.m.

Commander Sir Archibald South by: If I might do so without presumption, I would like to congratulate the hon. Member for Seaham (Mr. Shinwell) upon the speech which he has made. We all agree that he has in the past felt very strongly on the question of internal affairs in Spain and I think myself that his moderate and statesmanlike speech on the subject of this Agreement forms a model for many of us in this House. At a time of stress such as that in which we are now living, Spanish trade, in my opinion, is of the utmost importance to us and to the Spanish people. The restoration of good conditions in Spain will help to assuage the bitterness of the Spanish civil war. Improvement in the lot of the people in Spain, irrespective of the political opinions they may hold, is something which we all desire and which this Agreement gives us an opportunity of assisting. Out of Trade Agreements comes friendship between countries. I endorse what the hon. Member said just now, that the more Trade Agreements we can get with other countries, the more likely we and they are to understand one another's difficulties. Indeed, the Trade Agreement with Spain would furnish us


with an opportunity perhaps of being helpful not only with financial help but with advice generally, to Spaniards which might help them in the settlement of their difficulties.
There is at this time a greater importance to be attached to the conclusion of this Trade Agreement with Spain. As the hon. Member opposite has said, we need from Spain certain raw materials to help us in the prosecution of the war. Friendship with Spain, however, is of greater importance to us at the present moment than almost anything else. We may in the near future be faced with great difficulties in the Mediterranean. A friendly Spain working in collaboration with us will be of paramount importance to us should we be involved—and I hope we shall not be—in operations east of Gibraltar. There were those who some time ago, were rather Jeremiahs as to what might happen in Spain at the end of the civil war. We have seen a Spain which, I believe, is settling down with traditional friendship for the people of this country, a Spain which can contribute a great deal in the fight that we are making for freedom at the present time. [Laughter.] An hon. Member opposite laughs, but I would not expect him to understand any point of view but his own upon the subject of Spain. We are not debating now the question of internal policy in Spain, but whether it is desirable or not to make this Trade Agreement with the existing Spanish Government, not only in our own interests, but in the interests of the Spanish people themselves. We have had for hundreds of years friendship with the Spanish people. We have now an opportunity of holding out to the Spanish people something which will be of great advantage to them.
In making these few remarks about the Agreement I would like to add this. I believe it should be the basis of a much closer co-operation between ourselves and Spain and I would like to see it made the vehicle of an approach to the Spanish Government for an understanding between them and us. I do not believe there is sufficient British propaganda in Spain at the present time. Trade offers a vehicle to statesmen in this country, whereby we can engage in a considerable amount of propaganda in Spain. My information is that, at this time, there exists in that country very

intense German propaganda. This Agreement will give us an opportunity of countering to a large extent that propaganda which is so damaging to the Allied cause and I trust that the Under-Secretary will be convinced of the necessity of something more being done even than this Agreement, to get understanding and good relationship between ourselves and the Spanish people. It seems to me that there is now an opportunity for a mission to go to Spain. Nothing is as good as advertising at the present time and in view of the efforts being made by Germany, not only in Spain but elsewhere, I think it desirable that we should have an opportunity of countering that propaganda and this Agreement may offer such an opportunity.

9.37 p.m.

Mr. Benson: I hope previous speakers will forgive me if I do not follow their general remarks about this Agreement, but I want to confine myself strictly to its technical side. When I read the Agreement I had certain doubts and hesitations about it. I thought it possible that the Government had not quite realised how powerful an instrument this Clearing Agreement could be, particularly with a country like Spain to help us in our trade drive and conservation of sterling. When I heard the speech of the Minister these doubts completely vanished, and complete certainty was put in their place. The Minister has not realised what this Agreement could do, and does not seem to realise what it implies. He suggested that because we have proposed to block 45 per cent. of sterling receipts on the clearing account for United Kingdom exports, and another 45 per cent. for sterling area exports, that was a step in a vigorous export policy. But the policy which the hon. Gentleman is pursuing is merely the stabilisation of the position exactly as it was in 1935. He has merely gone back to the pre-war position and stabilised it. Of the Spanish imports into this country for that year something like 45 per cent. were paid for by British exports to Spain and similarly 45 per cent. by colonial exports to Spain.
What is the use of telling the House about a vigorous export policy that is merely confirming the position as it was before the Spanish war? I have no doubt it was desirable that exports from sterling


areas should go to Spain, but it is much more important that goods should go from the United Kingdom itself into Spain. If the arrangement as made by the Board of Trade holds, what happens is that we must find something like £5,000,000 to £7,000,000 a year of British sterling to pay for export trade from places like Canada, India, and Australia. What is much more important is that goods that come from Spain to this country should be paid for by goods going out of this country.
We are in a position to negotiate a far better Agreement than we have. Although Spanish ore may be important to this country, the British market is of vital importance to Spain. Before the Spanish war we took about 25 per cent. of the whole of Spanish exports, and these exports, of which iron was an appreciable but not a vital proportion, could find no alternative market. There are also citrous fruits, and tomatoes from the Canary Islands, for which England alone offers a large and continuous market. This bargaining power of ours has apparently not been used at all. The Board of Trade have been satisfied to stabilise pre-revolution conditions. The position in which we are à propos of Spain is that we can supply an enormous amount of the imports of Spain which she got from other countries, and we offer her an enormous market for her goods. Let me take some of the imports into Spain in 1935, the year which the Board of Trade have chosen to stabilise so far as the proportions are concerned. For example, Spain imported £4,000,000 worth of motor cars in 1935. Of that £4,000,000 of imports of motor cars, our share was £600,000. In the same year Spain imported £5,000,000 worth of chemicals, and our share was £350,000. She imported £2,000,000 worth of electrical machinery, of which our share was £120,000, and she imported £3,000,000 of general machinery, of which our share was £460,000.
Here we have a market which we can supply with British goods, a market which Germany to some extent supplied. Why should not this Trade Agreement have aimed at allowing us to force our goods upon Spain? One vital factor in fighting this war is the conservation of our sterling assets, and we shall have to use every possible device to conserve

those sterling assets now and in the future. If one turns to the most recent figures of imports and exports, our adverse balance will be found to be simply staggering, and it will continue to increase. We are importing at the present moment £1,200,000,000 worth of goods a year, and these have to be paid for either by exports or by the sacrifice of our sterling assets abroad. It is essential to us that there should be a really great trade drive which will force our goods into foreign markets, and we ought not to be satisfied with stabilising the position as it was in 1935. We can do it. The whole technique of exchange clearance with this definite purpose has been worked out by Germany most effectively.
Another point which seems to be completely overlooked and which is of vital importance is the rate of exchange. We are in a position, or we ought to be, with our bargaining power to fix as high a rate of sterling exchange as is reasonable. What is the position under the Agreement? Apparently the fixing of the sterling-peseta rate is to be left to the Instituto, and we are not even to be consulted about it. According to the Agreement—
Where the debt is expressed to be payable in pesetas, the relative payment shall be made in sterling at the official buying rate of exchange for sterling published by the Instituto.
Further, the Instituto are to communicate each day to the Clearing Office the official buying rate of that day. On what is that official buying rate to be based? It will be based on the free sterling rate, and not even on the official dollar-sterling rate. Just as the lira, and the currency of every small nation, fluctuates in relation to the £on the free sterling rate, so apparently, under this Agreement, the peseta is to be allowed to fluctuate on the free sterling rate. That rate is 3·50 as against 4 dollars, which means an enormous loss of sterling if the free sterling rate is allowed to prevail in all our various trade relations with small countries which are in neither the sterling nor the dollar area. What we should have done was to utilise this Clearing Agreement, and the immensely strong bargaining position which results from our immense market, to insulate the sterling-peseta rate entirely from the free sterling rate and even from the official dollar-sterling rate. It could be done. Germany has done it. In her


relations with the Balkans, Germany has invariably fought for a high mark exchange rate.

Mr. Holdsworth: A dishonest rate.

Mr. Benson: One does not want a dishonest rate. What I ask is that the free sterling rate shall not be allowed to prevail. I am quite prepared to make a strong case for improving on the official dollar-sterling rate, but at any rate, the free sterling rate, which in no way indicates the value of the £, should not be allowed to prevail. Why in this important matter it is left to the Instituto to decide the rate, is quite beyond my comprehension. I know that in a free market, under free exchanges, if you force up the value of your currency you tend to curtail exports. We know that from our bitter experience in 1925,when we went back to the Gold Standard. But we are not in a free market at present. Our imports and our exports are controlled. Germany has developed a technique of blocked currency and control of the exchange rate. We are in the position of offering Spainthis enormous market for her goods, far and away the most important market she has, and we are in a position to utilise our bargaining power to force up the sterling-peseta rate to a reasonable level. Not the slightest attempt has been made to improve the sterling-peseta rate. In February, the rate—taking the rate of the Bank of England Sterling Arrears Account—was 40·15 to the £, in March it dropped to 39·65, and the official clearing rate now is 39, whereas the voluntary rate under the Agreement is quoted to-day at approximately 45. I should be glad if the right hon. Gentleman, when he replies, will tell us exactly what is the voluntary rate and to what range of goods and debts it applies. It is not at all clear—at any rate if the voluntary rate can be at 45, there is no reason why the official rate should not also be at 45. The hon. Member for Bradford South (Mr. Holdsworth) suggested that to force up the sterling-peseta rate was dishonest.

Mr. Holdsworth: I did not suggest that at all. The hon. Member was referring, quite definitely, to the German methods, and they were what I was denouncing as dishonest.

Mr. Benson: I am afraid that I misunderstood the hon. Member. What I said was that the Germans had worked out a technique. You may have a technique for opening a safe and you may use it to get into your own safe or some one else's. The Germans have worked up their technique, and there is no reason why we should not use it.
What is the position of sterling at the present moment? Immediately war broke out there was a drop of 13 per cent. in value, but that did not represent the real economic position of England vis-à-vis the world. It was a natural reaction of the financial markets to the outbreak of war. What happened? The Treasury immediately stabilised that rate by fixing gold at 168s. per ounce. We shall have to use currency clearing agreements not merely in Spain but wherever we can possibly negotiate them and we shall have to use the blocking of sterling to force our exports into the markets of the world. Wherever there is an adverse balance of trade against us, and wherever the English market is of vital importance—and there is a very large number of countries where it is—we can establish a clearing agreement, and we can negotiate exchange rates, and utilise the blocking of sterling for forcing exports on the market. I suggest that there is nothing dishonest about that. We have to do it if we are to prevent this steady leakage of sterling which is our very life-blood. The effect of allowing the sterling-dollar rate to drop 13 per cent. at the outbreak of war has resulted, on our present rate of imports, in a leakage of sterling amounting to anything between £100,000,000 and £150,000,000 a year. That has to be made good. We must fight the £ back to its proper position, and we can do it. We have a negotiation and bargaining power second to none, and we ought to make this Spanish Clearing Agreement a prototype of clearing agreements with practically every country in the world. We ought to utilise those clearing agreements by the method of blocking sterling for two purposes. Firstly, the forcing of our goods on outside markets, and, secondly, in the re-establishment of a proper sterling rate.

9.54 p.m.

Mr. Wilfrid Roberts: I want to make only one general observation on this Agreement. I would


like to ask whoever is to reply to explain to us a little more clearly how the relative value of sterling is to be established under arrangements which have been come to in this Agreement. If I understood the Minister aright, all transactions between Spain and England would be paid for through the organisation set up under the agreement, and, in fact, there would be no free market for the peseta against the pound in any transactions whatever. If there is no free market in which the value of the peseta can be established, how is the value to be arrived at which will, as the hon. Member for Chesterfield (Mr. Benson) pointed out, be of vital importance in arriving at the payments that are to be made? I understand that the external value of the peseta has now been fixed for some time under the direction of experts who are not of Spanish nationality, but are experts of another country. That makes it all the more important that we should understand how the value of the peseta is to be arrived at.
The other question I would like to ask is of a more general character. There are other debts owing by the Spanish Government to this country, and I would like to know whether the damage done to owners of British shipping and to other property owners during the Spanish war has yet been met, or whether any arrangement to pay compensation has been made in connection with this trading arrangement. We were often told from the Government Front Bench that the time for the settlement for such damage was after the war in Spain. That war has now been over a year, and I would like to know whether any agreement has been arrived at with regard to that compensation. Damage was also done to a British battleship. Has any settlement been made for that? We hope that this Agreement will benefit British traders and also the Spanish people. We on these benches are very ready to agree that an increase of international trade is to the advantage of both parties concerned, but I would like an assurance that under this Agreement none of the £2,000,000 which is to be advanced to the Spanish Government can be used in ways which might be to the disadvantage of this country. Are there any means of preventing any of it being used for the rearmament of Spain which might not be used to the advantage of this country in future?
I do not believe that foreign countries necessarily admire an attitude of subservience on the part of the British Government. I have observed that other European countries find it quite possible to make agreements of a far-reaching character even though in the past they have not admired each other's political systems. I do not believe that any Spaniard would admire me the more for saying that I have changed my opinion about affairs in Spain. I have not done so, and I do not imagine that the Spaniards would expect me to change my opinion because the commercial interests of my country might be improved by any such change. But I would change my opinion on the Spanish Government if by their actions they were to show that they could exercise clemency and generosity towards their defeated opponents, and were also prepared to show in their controlled Press and on their controlled wireless that they were friendly towards our great democacy in the war in which we are engaged. If the British Government have been able to come to this commercial Agreement, the Spanish Government will, I hope, realise that it is a business arrangement, but realise also that it is by their actions, and only by their actions, that they can overcome the opposition to them which has been expressed in this country.

10.2 p.m.

Mr. Logan: This is the first time I have spoken in the House about the Spanish position. I have refrained from doing so on various occasions because the question was so delicate. To-night it affords me great pleasure to compliment one of my colleagues, the hon. Member for Seaham (Mr. Shinwell), on the magnificent manner in which he presented his case. I have been in a difficulty in regard to Spain during the last two years, having many friends on both sides, and being asked by both parties to visit Spain and express my opinion. I have always refused to do so for the simple reason that I should be considered a partisan. I have listened with amusement—I say that without any disrespect—to the discussion on the methods of exchange. It put me in mind of the time when I stood behind an exchange counter dealing with dollars and pesetas and the day-to-day rates of exchange in the money market; but I am


not concerned with that aspect of the question at all. To anyone who realises from the political and diplomatic point of view the value of making friends, surely this is the occasion to make friends. Often I associate with people not because I wish to but because I have to. I look upon the world, not as a place of sanity, but a place of madness. Sanity is to be judged by actions.
To-day we must realise that a friendly Spain might be a very powerful friend, and we want all the friends we can get, and I have been pleased to note the absence of acrimony and of the spirit of vendetta in the House to-night. It is better to bury and to forgive. I feel that the Spain we recognise to-day will have a chance of resuscitating itself and bringing all Spaniards to a recognition of the possibility of living together in harmony. I am not forgetful that other parties besides those in England have been using their influence in regard to Spain, but today we should be able to recognise, in the wonderful offer of reciprocity that has come along, that we may be able to come to a better arrangement for both these countries.
I feel that a step has been made in the right direction. Many of us on this side of the House have been most anxious for more friendly relations. I believe in a fight, if the cause is just. If I can avoid the fight, I do not want it, but if I have to fight, I say, Let us have the fight out. But we must have friends in a fight, and not enemies all along the line. From this side of the House our Front Bench speaker has done justice to the Labour party in the manner in which he dealt with this most delicate question, and I can certainly say, on behalf of many people whom I know in Spain, that it will be recognised as a most friendly gesture rather than as an arrangement in regard to money. The love of the people of a country is far better than monetary value.

10.7 p.m.

Mr. McGovern: I have listened with interest to the discussion to-night, and I also must congratulate the hon. Member for Seaham (Mr. Shinwell)—if he will permit me to do so. I recognise that he must have exercised very great restraint indeed in order to put over that case. Knowing the lan-

guage he can use, I appreciate to a greater extent the restraint that he showed to-night. I realise that in this issue one has to get to the stage where the relationship which was broken off on account of war or civil war has to be renewed, and that the great healing things among the nations are trade, intercourse and the visitation by friendly people of one another. It helps to modify even the most outrageous doctrines that may have been proclaimed.
I therefore realise to-night that, behind this Trade Agreement, there are other reasons. For example, we require, and this country requires, certain goods and materials that are in Spain, and Spain requires to find a market for her goods, a limited market at the present moment, in order to get the goods and the finances which she requires. I was interested to hear that a considerable amount of money was owing to traders in this country. The Government are, of course, interested in the payment of debts owing to the traders, and naturally they say to Spain, who cannot pay, "We will give you the money from State funds to pay into our private banking accounts. That will enable you to square the debt, and, at the same time, the State will draw a certain interest on that money during the period of the loan." That is an ordinary transaction, and we see it every day, in which the State machine is used as a "go-getter" for private industry in order to settle its accounts and to get its bank balances re-established.
I was interested also in the gospel proclaimed by the hon. Member for Seaham. He is prepared to use one dictatorship against another, because dictatorship No. 2, which he does not like any more than another, has certain things that can be used against dictatorship No. 1. It is useful to know that there is, at least, a plan behind this matter, and that we are not against dictatorships as a whole so much as against a particular dictatorship. We are prepared to use a Russian, a Japanese, or a Spanish dictator in order to smash the German dictator. That is illuminating and interesting. Therefore, in this Debate to-night we are only following the lines that I have continually proposed in this House—I agree with not very much success up to the moment—that we should extend that idea—I am only introducing this as an example—to


dictator No. 1and try the same policy of intercourse, association and reason and try to get out of all the difficulties in the world. In regard to the late Spanish problems, nobody could accuse me of being moderate in my language against the present Spanish dictator. I opposed him; I opposed the people also who came into the country from Russia and murdered the Spanish working class. I oppose murder wherever I find it, no matter whether it comes from a Tory, from a man propagating alleged Communist ideas or from an anarchist.
I must say I would not relish the job of ruling Spain, because no matter who rules Spain it will be a difficult job. They are a lovable people, but they are also a difficult people. Democracy and dictatorship may not suit the desires of the people; but they have a right to decide for themselves what form of government they will have, just as the people of this country have a right to form their own conclusions and opinions. I welcome the fact that we have engaged in these discussions and have developed through discussion and understanding a Trade Agreement. It is a commercial Agreement, but no person would attempt to deny that through commercial agreements with various countries you bring trade and a certain amount of prosperity and happiness to the people. In so far as that can be developed I welcome it, because I am glad to see the end, at least in the field, of this struggle where Spaniard was fighting Spaniard and brother fighting brother, and where almost a million of the best elements in that country were done to death, either on the field of battle or by being shot in the back by either side. I hope that the result of this Agreement will be not only to develop the friendly feeling between the peoples and that it will expand and develop, but that as we take Spain into the comity of nations and show that we have understanding and sympathy in our minds and hearts for them, it will enable the present dictator in Spain—I am not going to dictate to him, because it would be absurd—to modify his present attitude to the people who were taken prisoner and suffered in the late civil war. Whether they are right or wrong, men do things according to their own ideas, and in the accumulation of ideas even in this House none of us has the whole of the truth, but all of us have a part of

the truth. If we approach the subject from that angle, then some progress can be made.
If a twentieth part of the disturbing reports that I receive from time to time are true, then a tremendous number of men and women are going through a Gethsemane in Spain at the present time. Some are in prison, men from Ireland, from this country and from all over Spain, many of whom I know myself. Large numbers also have been done to death. I do not wish to say anything which would enrage the people or break off any friendly relationship, but if my small voice can be heard across the Mediterranean or over the Pyrenees, I would say to those at present in authority in Spain: "Remember that it is a good thing to be merciful, even to your opponents." I hope that they can go on building up a civilisation in Spain, that they can rid their hearts of antagonism and brutality, and that they can develop that great country and that great people. If Franco and his supporters can do that in Spain, I am sure there will be an immediate response from the people of Spain and of this country that will be well for a world that is going along the road of lunacy to-day.

10.16 p.m.

Miss Rathbone: I agree with nearly all those who have spoken, that this is not the time to stir up the hot embers of those bitter feelings that many of us felt, and still feel, about the Spanish struggle. We are discussing a business Agreement. Business is business. I am not going to discuss that Agreement in its details; I am not competent to do so. I am going to say only that the friendly feelings that we all want to cultivate with the great Spanish people would be much more easily fostered if we did not recollect how much more easily Spain itself could recover its prosperity if thousands of Spanish men and women were not still languishing in prisons and concentration camps because of their political opinions.
I want to say only one thing more. If there are to be renewed friendly feelings on both sides, they must depend not only on moderation of expression in this country. We must all agree that the speech of the hon. Member for Seaham (Mr. Shinwell) was a triumph of understatement, but those of us who follow the


State-controlled Spanish Press, as I still try to do, cannot help noticing the extreme and dangerous hostility to this country of much of that Press. If there is to be a renewal of trade relations, let feeling follow those trade relations; and let this new Agreement be, on both sides, the opportunity for a better understanding and better feeling, and a kindlier attitude. That cannot be only on one side. If we show such an attitude towards Spain, Spain must show it towards us.

10.18 p.m.

Mr. J. J. Davidson: I rather hesitate to add to the congratulations that have been showered on my hon. Friend the Member for Seaham (Mr. Shinwell), but I must say that his statement to-night will rank as one of the most statesmanlike utterances we have heard in this House for a considerable time. But as one who, like the hon. Member for Shettleston (Mr. McGovern) and other Members of this House, visited Spain during the recent troubles, I should have been much happier if, apart from raising any great controversy with regard to the past, one or two clear questions had been put from the Government side with regard to this Trade Agreement. After listening to the speeches of the hon. and gallant Member for Epsom (Sir A. South by) and my hon. Friend the Member for the Scotland Division of Liverpool (Mr. Logan), I have great hopes that if the trade negotiations with Russia come to anything, we shall hear the same benevolent kind of speeches from them. If the hon. Member for Seaham and other Members on this side have shown restraint to-night, that is nothing compared with the restraint that has been exercised by the Secretary to the Department of Overseas Trade and the restraint that, I presume will be exercised by the Under-Secretary of State for Foreign Affairs. When I remember how the British Government were consistently described for two solid years by the Government of General Franco, when I remember the statements that were made about the Under-Secretary for Foreign Affairs and the Prime Minister, when I remember how the British Government were condemned in broadcast after broadcast as the greatest hypocrites to the progress of civilisation and democracy in the

world by the same Government with which we are negotiating this Agreement, I envy them their diplomacy, their statesmanship and their restraint.
The Secretary to the Overseas Trade Department referred to unpaid debts and then to past commercial debts. I wonder whether we can separate those two things and whether the unpaid debts take in the compensation which was promised time after time with regard to British sailors who were shot down, whether it refers to the sailors who have been buried in Spain with the Union Jack round their shoulders, or whether it refers to the losses of private enterprise during those troubled times. I should like to ask, further, whether the Government representatives have considered the effect that this Agreement may have on the opinions of such neutrals as are left in the world to-day. Have they considered, for instance, whether America will forget that those same speeches which were made to-night on behalf of this Agreement were made consistently on behalf of trading agreements with Germany in the past, that our trading agreements in the past were used by other Powers to organise their war machines, and that British finance and credit were used to bring into being that to which we are opposed to-day? I should like to ask for a clear and definite statement as to whether they have any information which would lead them to believe that this Agreement cannot possibly be used to assist those whom we are fighting to-day.
The hon. Member for Shettleston (Mr. McGovern), whom I consider one of the most astute politicians the House has, referred to the question of making the same approach to other nations. He must be aware that that has already been done and that we entered into an agreement with Germany and assisted them financially, we gave them the things they asked for, and the same speeches were made by many Members, and it resulted in strengthening their power in Germany, just as I am anxious lest we strengthen the same kind of thing in Fascist Spain. This is an Agreement with a Fascist nation. The hon. Gentleman opposite said this would bring better times to the people of Spain. Is he quite sure that that statement is correct? I ask because, as far as our information is concerned, the people of that country, in the conditions


under which they live, under which they are oppressed and suppressed, and in which many of them are in prison for paltry crimes or for no crimes at all, will not benefit by the strengthening of that Fascist Power which is oppressing and suppressing them, unless the British Government, who claim to stand as the representatives of the democracies of the world, make some stipulation or effort, along with the Trading Agreement, to remove the oppression and suppression of the people in that particular country.
I have visited Spain, and I can say that the people of Spain have been truly described to-night as a lovable but difficult people. I know of an elderly woman, whose two sons escaped after fighting in Spain, who was executed a few weeks ago. I want to know whether the Government think that there is any chance that they may be able to establish such relations that effective representations will be made with regard to the horrors of Fascist Franco Spain to-day. The hon. Member for Shettleston, whom I described as an astute politician, knows perfectly well that his peroration with regard to this Trade Agreement will have absolutely no effect beyond the Mediterranean. As the British Government are moved by definite action, so are the Spanish Government; and therefore I trust that the hon. Member for Shettleston, in asking for moderation and restraint from Fascist Spain and that we should say no word which would bring up these terrible troubles of the past, will also accept the position that speeches in this House by back bench Members will have no effect and that pressure upon the Government, whenever opportunity occurs, by trading agreements or in any other way, to try and establish relations between the peoples of the two countries would be more effective than perorations asking that a voice may be carried beyond the Mediterranean.
It is my belief that neutral opinion will be affected in a detrimental manner by this Trade Agreement. I believe that America and other neutrals will realise that we are doing what we tried to do to Germany. We are doing what the First Lord of the Admiralty criticised the Government for doing to Italy when he stated that, if we left Italy alone without assisting her and giving her loans, the economic development of the country would have applied its own corrective.

Therefore, I trust we are very sure that American and other neutral opinion is not convinced that it is other than merely a subterfuge to try and buy support from a Fascist country, of which we cannot establish any proof. If that is the case, I would consider it to be a bad Trade Agreement. But if the Government representative can provide us with definite, concrete evidence that this will be a step towards establishing relations that will have an effect upon the oppression and tyranny of the Spanish people, it will be a step forward towards that which we all desire.

10.30 p.m.

The Under-Secretary of State for Foreign Affairs (Mr. Butler): I am sure we have all been glad to welcome the general evidence of the value of this Agreement, which has been expressed by speakers on all sides of the House. I am sure that this evidence will not go un-remarked either in this country or Spain and that it will be welcomed by all those who wish to see developed, gradually but surely, friendship between the two countries. Tributes have been paid to the hon. Member for Seaham (Mr. Shinwell), and I would certainly like to add mine. I took part during difficult months and, indeed, years, in Debates in this House upon Spain, and I have no complaint to make of the criticism that was levelled against the Government at that time. It is remarkable how, in this hour of responsibility, the British people, through their representatives in a freely-elected Parliament, rise to the importance and seriousness of the occasion and subordinate their own, in many cases, strongly-held opinions when they feel that the Government have taken a step which is in the national interest.
The attitude of His Majesty's Government towards this strong feeling and towards Governments of a certain type in certain countries is, I think, quite clear. The political regime and form of governments in other countries are no concern of ours any more than our political institutions are the concern of other countries which are governed by an authoritarian regime. But it is by the policy and not by the character of a foreign Government that we are affected. When we look at the relations which have been maintained between ourselves and Spain since the outbreak of war, I think we can safely say that they have steadily improved and


that we have no cause for complaint of the attitude of the Spanish Government, which has been one of strict neutrality. We respect that attitude and shall continue to do so as long as it is respected by others. Moreover, His Majesty's Government are convinced that Spain is determined to maintain the neutrality of herself and of her possessions.
When I say that we have noticed an improvement in relations, the House may wish me to draw attention to one or two instances. Let me take, for example, the fact that, at long last, in the realm of propaganda, to which reference has been made, British newspapers are now freely circulating in Madrid and certain other cities. Their circulation is, I think, being encouraged and enlarged, and I am glad to say that, when British newspapers appear on the streets, they are rapidly snapped up by the Spanish population. Hon. Members in the course of representations to me, and in the course of their normal representation of their constituencies, have frequently called my attention to the detention of certain British prisoners of war in Spain. I am glad to say that during the last month or so the remaining British prisoners, detained by the Spanish Government after the Spanish civil war, have been released.

Mr. W. Roberts: Does that include Irish?

Mr. Butler: With one exception—Major Frank Ryan, about whom many representations have been made to me. He is a citizen of Eire and remains detained. His Majesty's Ambassador has had instructions to offer his services to the Eire Minister to see what can be done for the release of this gentleman.
The hon. Gentleman the Member for Seaham asked me whether I could assure the House that there were advantages in the moral as well as the material sphere. He said he regarded this Agreement as fairly satisfactory from the economic point of view, and he adduced certain economic arguments in relation to some important raw materials, such as iron ore, and showed that the Agreement had important economic results, particularly in view of developments in other parts of the world. That, I think, is true. He asked whether, in the moral sphere, I could give any indication of improve-

ments in the regime. I must be quite honest with the House. I do not think I could satisfy the hon. Member that things are exactly as he would like them to be. But we have had an indication that there are fewer prisoners at the present time and that sentences have been commuted, and I can say that that is an example of a growing tendency which I believe the improved economic position of the country and this Agreement will encourage rather than diminish. My Noble Friend has communicated with His Majesty's Ambassador on this point and the statement which I have made to the House is based on the most recent information.
Certain points have been raised by other hon. Members. The hon. Member for Chesterfield (Mr. Benson) made a speech which illustrated the truth of the generalisation that in every Debate the House of Commons produces an expert. I do not propose to compete with the hon. Member in his knowledge of financial terms and financial facts. He raised an important question about the rate of exchange. The general statement I would make is that the Spanish authorities must realise that they must be able to market their produce at competitive rates if they are to sell, and I can assure the hon. Member that my hon. Friend, who is a greater expert in economic matters than I am, and his advisers and the Treasury, will bear in mind the points which he has made and give them the attention they deserve. I would only say that the questions which he has raised can always be brought up if we find in practice that they are preventing the Agreement working satisfactorily. He also raised a question about the rate fixed by the Institudo. The Institudo rate is a voluntary rate in respect of special payments; that is, payments of a voluntary character. It is a technical term, meant to cover insurance payments, payments to relatives, capital repatriation and payments of an allied nature. On that particular score he may not find his apprehensions are as serious as he feared; though, if they are, his speech will have that close and earnest attention which it certainly deserves.
The hon. Member for North Cumberland (Mr. W. Roberts) raised one or two points, and in particular asked whether we had remembered that compensation might have to be paid to those who lost


ships in the course of the Spanish civil war. He frequently raised the same question in the course of our previous discussions, and I am authorised to say that in the course of the negotiations, which after all related to a different subject, our position in respect of compensation was reserved, and that the fact that this Agreement has been made does not jettison such claims. The hon. Member for the combined English Universities (Miss Rathbone) mentioned the Press. We cannot at present feel that in every respect the Spanish Press has been giving a fair show to our side. It is not for me to use only words of honeyed balm, but it is the hope of His Majesty's Government that, as a result of this Agreement, and as a result of the atmosphere which we believe will be created, comments in that Press will assume a tone more in consonance with the atmosphere which we all desire and with the atmosphere which has been exhibited in the House this evening.
I think the main anxiety of hon. Members has been as to whether the people of Spain will profit by this Agreement. After all, it is in the people of Spain that we in the House are particularly interested. It is difficult to overestimate the extent to which the population has been impoverished and exhausted by the civil war. Without the foreign exchange with which to buy raw materials, it can safely be said that it would have been impossible to start the necessary revival and so relieve unemployment for the masses who have had in Spain their meed of suffering. I believe one of the results of this Agreement will be that raw materials will be provided not only for Spanish agriculture, in the way of fertilisers and so forth, but for the industry, for example, of Catalonia, a district which suffered so much and in which a revival of industry could so much help the population. It was for this reason that initial help in the form of a loan was considered essential, since it was thought by our experts that the normal exchange of commodities would not provide the necessary impetus to recreate Spain and give her people an opportunity for a better life.
It is our opinion, from the diplomatic point of view, that the exchange of commodities will create a better diplomatic

feeling between our two countries. By the establishment of strong commercial links, which will be created as much by the repayment of old debts as by the increase of trade, we believe that a series of commercial bridges will be built between our two countries. This should help to create a large body of opinion which will be on the side of friendship and understanding between us. That is the expert opinion which we have been able to gain by inquiry on the spot from our own representatives. We believe that such a system of commercial interchange will help to stabilise conditions and to avert uncertainties and disorder—and these are the elements which play into the hands of those who seek to profit from Spanish weakness. We hope that order and quiet will result in a resumption of industry which will be better for labour, and that the clemency to which I have referred, and for which we all hope, will follow normal conditions and reviving prosperity, and the absorption of Spanish man-power in labour for her industry. This process has, we believe, already begun. I know that some hon. Members would like His Majesty's Government to intervene directly with the Spanish Government. That is a difficult thing to do. We can indicate our feelings, but I believe that our most effective intervention is in taking a step such as we are taking to-night, and by approving this Agreement to rehabilitate the economic state of Spain, to cease our controversy, and to revert to a friendship with a neutral and a prosperous Spain.

Question put, and agreed to.

Resolved,
That the Clearing Office (Spain) Amendment Order, 1940, dated 30th March, 1940, a copy of which was presented to this House on 2nd April, be approved.

The remaining Orders were read, and postponed.

ADJOURNMENT.

Resolved, "That this House do now adjourn."—[Mr. James Stuart.]

Adjourned accordingly at Sixteen Minutes before Eleven o'Clock.